~ Nt Narayana Health T~
Date of submission: 8 th August 2018
To To The Seereta ry The Secretary Listing Department Listing Department BSE Limited National Stock Exchange of India Limited Department of Corporate Services Exchange Plaza, Sandra Kurla Complex Phiroze Jeejeebhoy Towers, Mumbai - 400 050 Dalal Street, Mumbai - 400 001 Scrip Code- NH Scrip Code - 539551
Dear Sir/Madam,
Sub: Annual Report for the FY 2017-18 Ref: Regulation 34 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015
Please find enclosed the Annual Report for the financial year 2017-18 as required under Regulation 34 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 duly approved and adopted by the Members at the 18th Annual General Meeting held on 3rd August 2018.
We request you to kindly take this on your record and oblige.
Thanking You,
Narayana Hrudayalaya Limited
P,~aQUSl'1 N 1rayana Hrud~ ,, 1 l CIN S: I 1KA2000 .J27 '9 Registered Office 258/A, Bommasanora Industrial Area. Ane1 ANNUAL Narayana Hrudayalaya Limited 2017-18 REPORT CONTENTS 01-38 Company Overview 01 NH’s Footprint in India 02 Operational and Clinical Highlights 04 Chairman’s Message 06 CEO’s Message 08 HCCI-Cayman Islands 10 Clinical Review of Services 18 Clinical Excellence through continuous improvement and 39-100 101-236 monitoring Statutory Reports Financial Statements 20 Patient Safety 39 Board’s Report 101 Standalone Financial 22 SMAC Social Mobile Analytics Statements and Cloud 60 CSR Report 166 Consolidated Financial 25 Reaching New Milestone 67 Corporate Governance Report Statements in Services 83 Business Responsibility 26 Board of Directors Report 30 management Discussion and Analysis You can find this report and additional information, log on to www.narayanahealth.org NH’s footprint in India As on 1st May 2018 Kakriyal, Jammu Northern Region western Region 3 Hospitals 5 Hospitals Operational Beds: 543 Operational Beds: 940 Delhi NCR Jaipur Guwahati Palanpur Durgapur Jamshedpur Ahmedabad Kolkata Raipur Mumbai Eastern Region Karnataka Region Bellary 7 Hospitals, 6 Heart Centres 9 Hospitals, 1 Heart Centre Hospital Operational Beds: Hospital Operational Beds: 2,220 Shimoga Bengaluru 2,042 Heart Centres Operational Beds: Heart Centre Operational Beds: 322 Mysuru 49 Bengaluru has 4 hospitals Kolkata has 6 hospitals (3 are acquired) Map not to Scale. Annual Report 2017-18 1 Company Overview Statutory Reports Financial Statements Operational and Clinical Highlights 2 Narayana Hrudayalaya Limited NH commissioned 207 capacity Successfully consummated the A rare case of a 5-year-old boy bedded SRCC Narayana Hospital acquisition of the partner’s entire with fulminant hepatic failure was at Haji Ali, Mumbai which is a stake in Cayman Islands Hospital, treated with an emergency liver premier one-of-its kind paediatric making it a wholly owned subsidiary transplant procedure at Mazumdar facility in April 2017 of NH and thereby creating value for Shaw Medical Centre, Bengaluru all our stakeholders MSMC, Bengaluru treated a rare NH commissioned its state-of-the Extending advanced clinical cancer called Alveolar Soft Part art 211 capacity bedded Narayana programs beyond the metros, Sarcoma of Pelvic Bone. The Superspeciality Hospital, Gurugram, a minimal invasive surgery like affected part of the pelvic bone a world class medical facility TAVI was performed at Narayana was removed and replanted after catering to the healthcare needs of Multispeciality Hospital, Mysore, sterilising it via radiation through a the NCR region in March 2018 first of its kind in the city technique called Extra Corporeal Radiotherapy Our hospital in Howrah successfully performed a complicated procedure involving Intra-Cardiac Repair for Tetralogy of Fallot along with a complete chest wall reconstruction on a 2-year-old girl Annual Report 2017-18 3 Company Overview Statutory Reports Financial Statements Chairman’s Message National Health Protection Scheme – Inching towards the Dream of Ayushman Bharat The Union Budget presented in Febuary 2018 saw the unveiling of a mega healthcare project, The National Health Protection Scheme (NHPS) is aimed at extending healthcare insurance to 100 mn families and raising the insurance ceiling to ` 5 lakhs per family. The scheme will target up to 500 million individuals from financially vulnerable households, a demographic that accounts for 41.3% of the population. The scheme of this scale will be a game changer for the Indian healthcare industry. In Rural India, 150,000 basic healthcare facilities exist only on paper and offer only maternal and child healthcare services. By providing free access to secondary and tertiary healthcare services to millions of people, it will open up avenues of growth for healthcare operators like NH which emphasises on universal healthcare coverage. We, at NH, are quite excited about this revolutionary scheme and are inclined towards working in tandem with the government agencies to progress towards this goal of universal healthcare for all. Closing the Looming Healthcare Talent Gap – Carving Opportunities out of Problems In the World Health Organisation’s ranking of health systems of countries, India is ranked at 112, way below countries like To the Esteemed Shareholders, Bangladesh, Indonesia, Iran and Iraq. This abysmal rank Providing affordable, quality healthcare to speaks volume about India’s fragile medical infrastructure masses formed the bedrock of Narayana and shortage of clinical talent. A recent survey by Boston Hrudayalaya back in 2000 and we are Consulting Group and Confederation of Indian Industry states proud to have carried this baton all these that Indian healthcare sector will generate 40 mn new jobs by 18 years. We are progressing towards our 2020. There is a huge opportunity in the healthcare sector as aim of Healthy India with our continued the World Bank predicts a shortage of 80 mn workers by 2030 endeavours driven by twin engines of globally and India will need 2 mn doctors and 6 mn nurses frugal innovation and clinical excellence by that time. There is a dire need to create an ecosystem and fiscal year 2018 was no exception. It of skill sets built on a knowledge-based society. Private turned out to be a historic year for us as hospital operators have to work in tandem with government we projected ourselves on Pan-India stage bodies to create a learning environment. Indian healthcare with our maiden entry in Delhi NCR and sector could turn out to be one of the largest employers and Mumbai markets. Our focus on opening give an impetus to the economy. NH is working with various the doors of healthcare to a broader set developmental agencies and other institutions, such as the of population helped us serve ~2.6 mn National Skills Development Council, and College of Physicians patients in FY18. Our ethos with patients’ and Surgeons to address this critical skills shortage. Our well-being at the epicentre have led to vision is to convert all our hospitals into training institutions your company revolutionising every touch that will train the healthcare workforce for the 21st century. NH point of the patient care cycle. is also investing in hospital management courses to prepare succession plans across all levels of the organisation. 4 Narayana Hrudayalaya Limited % mn ~60 ~2.6 of deaths occur due to patients treated at Non-Communicable NH in 2018 Diseases in India Stepping up the Fight against the investing more and more of my time on creating software for Non-Communicable Diseases doctors that will revolutionise their practice. Today, Non-Communicable Diseases (NCD) are responsible for over 60% of deaths in India with cardio vascular disease Caring for the Uncared being responsible for ~20% deaths and cancer not far behind Since its inception, NH has taken various social responsibilities, at ~10% deaths. As per experts, cancer cases will increase informed by our experience and in alignment with our vision significantly in the coming years. By 2020, around 1.7 mn towards equitable, accessible and affordable healthcare for all. people are expected to have cancer and deaths due to cancer NH has sought to leverage on CSR towards realising broader will increase up to 20%. system level goals and expand into different domains like healthcare, education and environment. Some of the initiatives To empower NH with all kinds of medical technology and are listed below: clinical talent to fight the rapid rise of cancer, we devised a strategy to create regional Centre of Excellence (COE) across E - Health Centre Program all our clusters which started off by creating state-of-the NH is the healthcare partner in this program to operate & art oncology blocks in our flagship Health City Campus at manage the eHealth Centre’s (eHC). eHCs are fully equipped Bengaluru and our unit at Mysore, followed by acquisition of with workstations, open electronic medical records (EMR) Westbank Hospital at Kolkata to strengthen the oncology play systems, biometric patient identification and integrated in East and subsequently forging partnership to run renowned diagnostic devices. 10 centres have now been established Dharamshila Cancer Care unit in Delhi so as to equip the across India. Since the program’s inception in December 2014, northern cluster with oncology expertise. In the Western cluster, we have provided tele-consultations to ~45,000 patients and we are in the process of commissioning a radiation oncology screened ~12,000 patients. block in Raipur unit. We believe that oncology would be the next driver of growth in the Indian healthcare context and with Mobile Mammography Screening these COEs, we, at NH, would be able to provide world-class It aims to create awareness among the people about breast expertise and medical opinion on oncology cases. cancer and hence initiate early diagnosis. We have been able to screen ~20,000 women and ~5,000 women who Digitising Healthcare, Touching Lives have availed mammograms. We have detected 41 cases of The ubiquity of technology and its seamless connect is breast cancer so far, with 11 women detected this year. 24 of permeating almost every aspect of the economy and its the cases detected through these have been treated at NH revolutionising impact on healthcare services is quite evident. facilities. We, at NH, work towards a single stated objective of improving With all these endeavours, we strive to bring affordable quality health of our patients and technology has emerged as a potent healthcare within the reach of all the people. Our journey is not tool in this regard. over until all people have universal access to quality healthcare In this direction, we are incubating a technology company, Cura and we will leave no stone unturned to realise this goal. At the Tech, and are the lead sponsors in this next generation startup end, I would like to thank all our stakeholders, employees and which is building a digital clinical assistant into the Electronic associates who have reposed trust and confidence in us. Medical Record (EMR) which will assist the physicians in making faster, smarter and more accurate diagnoses. We strongly believe that digital health will make healthcare safer, Dr. Devi Prasad Shetty affordable and accessible and that is why I am personally Chairman Annual Report 2017-18 5 Company Overview Statutory Reports Financial Statements CEO’s Message Expanding All Arms: Unfolding Pan-India Play With single-minded focus to serve patients across the country, we took conscious efforts to develop our operational network in Delhi NCR and Mumbai markets, where we did not have any presence until last year. NH ended fiscal year FY17-18 with one year of full operations at Dharamshila Narayana Superspeciality Hospital & Research Centre, East Delhi and SRCC Children's Hospital, Mumbai. Beginning FY17-18, we also fortified our presence in Delhi NCR market by acquiring a near complete multi-speciality hospital in Gurugram which we have recently commissioned with the state-of-the-art medical infrastructure. Proximity of Dharamshila and Gurugram facilities in Delhi NCR will help us leverage upon the synergistic value emerging out of this well-knit cluster by encouraging the usage of shared resources and clinicians’ mobility. With Northern cluster centred around Delhi NCR slowly taking shape, we are emerging as a true Pan-India quality healthcare service provider. Treading Successfully in International Waters By demonstrating our mettle at Cayman Islands Hospital, NH’s only hospital outside India, we have taken nascent steps towards showcasing our clinical expertise and operational excellence in international geography. By earning the prestigious Gold Seal of Approval from Joint Commission International (JCI) just after a year of operations and breaking even at monthly EBITDA level in 24th month of its operations, this hospital has emerged as the premier healthcare destination in Caribbean region. This hospital has clocked revenue of US$ 44. 6mn during FY18, which translates into a staggering CAGR of ~79% over the period of financial year 2015 to 2018 and is currently generating positive cash flows. For the FY17-18, with an average occupancy of 27%, this 4-year-old, 106 capacity bedded facility Dear Stakeholders, has delivered ~14% EBITDA margins, which we foresee to It is a matter of great privilege for me to increase with ramp-up in occupancy. Based on the strong present the performance of your company operational performance and prospects of Caribbean region, for the FY17-18. Though the year gone NH acquired the partner’s entire stake in the hospital in January by remained challenging for the Indian 2018, making it a wholly owned subsidiary of NH. healthcare industry, but your company Despite the significant traction in Cayman Islands driven by our has shown resilience to the unpredictable clinical excellence and efficient operations, we remain cautious regulatory environment and hence managed and prudent on capital allocation in international territories. to close yet another year with commendable Buoyed by the confidence from this facility’s performance operational as well as financial performance. and in line with our broader ambition to evolve as a quality healthcare provider at the global level, we are planning to establish our strategic entry in South-East Asia through our preferred engagement models, limiting our capital outlay. 6 Narayana Hrudayalaya Limited US$ 44.6 mn ~10% in revenues in FY18 revenue contribution from Cayman Islands from International Hospital patients Growing Contribution from International Patients to deliver industry-leading growth of ~12% yet again, which gives In addition to performing pioneering and critical work with the us the reason to cheer upon. highest degree of clinical precision possible, we also keep On the profitability front, we are quite satisfied with our exploring new avenues to maintain the growth momentum. resilient margins considering the impact of price cap Developing international patients’ base was our well thought- on cardiac stents, losses at SRCC Children’s Hospital, through strategic call in this direction, which we believe, is an Mumbai and pre-commissioning expenses at our recently important lever of growth. With well-directed marketing activities, commissioned Gurugram facility and introduction of GST. Full the share of international patients to group’s revenues has year consolidation of Cayman Islands’ Hospital from FY19 will increased tremendously from ~5% in FY16 to ~10% in FY18. provide a significant uptick to group’s profitability and cash Strategic location and well-invested medical equipment across flows, now that it is 100% owned by NH. specialities under one roof has already helped Gurugram From cash flows perspective, our intention has always been facility attract initial eyeballs from both doctors’ fraternity and on judicious utilisation of capital. This resulted in NH enjoying patients’ community. Within ten days of its commissioning, the healthy headroom with gearing ratio being amongst the the fact that an Iraqi patient chose our Gurugram hospital to lowest in the industry until the beginning of FY18. Leveraging undergo knee replacement surgery alludes to the brand pull upon this strong financial strength, your Company managed to NH has created in the minds of not only Indian patients but bolster its footprints within India by acquiring Gurugram facility also their international counterparts. With these facilities and and in overseas market by acquiring partner’s remaining stake our Children’s only hospital in Mumbai, we are confident that in Cayman Islands Hospital. Notwithstanding these intensive international community will play a vital role in driving the cog of capital investments, our cash flow generation is as robust as NH’s next phase of growth. they have been in the last two years. Exemplary Growth Led by Matured Centres While in the long run, we remain devoted towards growing During the year just concluded, our operating revenues grew our footprints but in the near term, we are focussed on by 21.4% on a year-on-year basis at ` 22,809 mn. Though the consolidation of operations, specifically the newer hospitals in growth was led by continual outperformance in its matured Delhi NCR and Mumbai. We also remain committed towards centres with over 5 years’ vintage, but younger set of hospitals maximising the return on capital for our shareholders. With such as Whitefield, Guwahati, Jammu also provided a major faith and support which all our stakeholders have shown in thrust to Company’s revenues. Our flagship Centres of Excellence NH, we believe that we will be able to take this institution to continue to be the backbone of NH’s performance, providing the pinnacle of success. In the end, I wish to thank everyone it the necessary cushion with ~50% revenue contribution. The for believing in our cause to provide quality healthcare Health City, Bengaluru continued to grow at an impressive services to the masses. revenue growth of close to ~16% in FY17-18. With our relentless endeavour towards performing cutting edge clinical procedures Best Regards, such as bone marrow transplants, minimal invasive surgeries etc., revenues of Mazumdar Shaw Medical Centre grew by ~20%. Despite being a single speciality hospital with close to 18 years in Dr. Ashutosh Raghuvanshi operations, Narayana Institute of Cardiac Sciences has been able Vice Chairman, Group CEO and Managing Director Annual Report 2017-18 7 Company Overview Statutory Reports Financial Statements HCCI-Cayman Islands Setting the Ground for The Pilot Streamlined operations and supply chain efficiencies coupled with strict control on cost have been key differentiators in our growth story. On the back of the success we have achieved in Indian landscape, we put to test our skills and expertise, we 8 Narayana Hrudayalaya Limited 24th month of operations and for fiscal cutting-edge competitive medical cases year 2018, the unit reported an operating it undertakes: revenue of US$ 44.6 mn registering a For the first time in the region, Cardiac CAGR of ~79% over FY15-18 and an Contractility Modulation device was EBITDA margin of ~14%. The facility implanted to save a patient from heart broke even at PAT and free cash flows failure at our Cayman Islands hospital to equity level in FY18 points towards a building up of a strong positive trend in First Arthroscopic Latarjet surgery in the hospital operations and its profitability. In Caribbean region was performed at the terms of average realisations, the facility Cayman Islands hospital. It is the most is churning out an ARPOB of ~US$ 2.0 difficult surgery in shoulder Arthroscopy mn at an occupancy of ~27% in 2017-18. and only about 10 surgeons in the world are currently using this technique Stage Set for Majority Play The sheer success NH tasted in its 1,000th Cath procedure was performed maiden international project instilled a lot at the facility in March 2018 of confidence in the management about First limb lengthening procedure in NH’s capability to disrupt the foreign the Caribbean region was performed markets with its differentiated business at the facility using the magnetic model. This led the company to acquire telescopic nail the entire partner’s stake in HCCI making it NH’s wholly owned subsidiary recently. Doctors at the Cayman Islands facility This transaction also strengthened the successfully performed a rare case of foundation of NH’s global strategy aimed pulmonary thromboendarterectomy on at expanding its presence in South East an 80-year-old woman developed in Indian healthcare scenario, Asia and certain regions in Africa. in international territories in 2014. This led to germinating the seed of international One-Stop Shop for All Your operations of NH and the Cayman Medical Needs Islands hospital came into picture in The facility provides a slew of services i.e. April 2014. We started as a minority adult cardiology, paediatric cardiology, equity partner with 28.6% stake with the adult and paediatric cardiac surgery, responsibility of operations with NH and orthopaedic surgery, pulmonology, Ascension Health as the majority partner. paediatric endocrinology, neurology, The idea was to have a multispeciality neurosurgery, medical oncology, urology unit in the developed world just outside among others under one roof. In terms the purview of US jurisdiction where NH of patients’ footfalls, this unit attracts could bring in element of frugality and patients from the neighbouring islands innovation to drive down of the Caribbean region and has the the cost and thus pass on the benefit to potential to further widen its catchment the patients. area and tap into healthcare markets of North Americas and Central Americas. Strong Footing on the Financial Paddle Clinical Excellence Delivered at Within two years of operations, this 106 Every Step capacity-bedded facility achieved its On the clinical front, the facility continues monthly breakeven at EBITDA level in its to make headlines with the success of its Annual Report 2017-18 9 Company Overview Statutory Reports Financial Statements Clinical Review Narayana Health has been at the forefront in the fight against Cardiovascular epidemic in India. The commitment of our cardiologists and cardiothoracic surgeons has led to increasingly better outcomes improving the lives of thousands of patients who visit many of our hospitals every day. We invest in state-of-the-art technology, shown useful in assessing whether training and education to stay ahead of to perform angioplasty or stenting on the curve. As a result, in the last decade, "intermediate" blockages or perform we have become a preferred destination medical management of the case. It for hundreds of thousands of patients helps prevent unnecessary procedure for complex as well as routine Coronary and surgeries Artery Bypass Surgery and Valvular 1,800 Intravascular Ultrasound (IVUS) Diseases. We are slowly becoming Cardiac MRI Intravascular Ultrasound (or IVUS) one of the preferred centres for Heart allows us to see a coronary artery from Transplant. Complete Range of Cardiac the inside-out. This unique point-of- Care Services: view picture, generated in real time, Complete Range of yields information that goes beyond Cardiac Care Services what is possible with routine imaging methods, such as coronary angiography, Cardiac MRI performed in the cath lab, or even non- Cardiac MRI is used to diagnose a wide invasive Multislice CT scans. range of heart conditions. These include Electrophysiology Study and coronary heart disease, congenital heart 3D Mapping System disease, inherited heart condition, heart 5,300+ Electrophysiology studies (EPS) are tests valve disease and cardiac tumours. CT Coronary that help doctors understand the nature There is increasingly strong evidence that of abnormal heart rhythms (arrhythmia) Angiography cardiac MRI is very good for complex along with its location. Result of the cases and for diagnosing conditions procedure helps our doctors decide where other tests have been ambiguous. whether a pacemaker, an implantable It provides high-resolution images and cardioverter defibrillator, cardiac ablation can give very accurate measurements or surgery is necessary, it also helps of the heart. It is also very safe, which is separating medical management cases particularly important as some patients, from intervention cases. such as those with complex congenital The system enhances the accuracy heart disease, need multiple scans over of delivering Radiofrequency Catheter time. Ablation, which can treat and cure most Fractional Flow Reserve cardiac arrhythmias in place of life-long Fractional Flow Reserve, or FFR, is a treatments. The overall lifecycle cost of guide wire-based procedure that can care for the patient comes down due to accurately measure blood pressure the curative nature of this therapy. Our and flow through a specific part of the hospital has performed more than 250 coronary artery. The measurement such procedures with 150% year-on- of Fractional Flow Reserve has been year growth. 10 Narayana Hrudayalaya Limited Cases Our hospital in Jammu performed the first case of endovascular aortic repair in the region. Endovascular aneurysm repair (or endovascular aortic repair) (EVAR) is a type of endovascular surgery used to treat pathology of the aorta, most commonly an abdominal 12,600 6,400 aortic aneurysm (AAA) Angioplasty CABG Health City, Bengaluru diagnosed cyanotic heart disease, a type of congenital heart disease of a 2-year-old child. RVOT stenting, a latest hybrid technique was used to treat the patient Extending advanced clinical programs beyond the metros, a minimal invasive surgery like TAVI was performed at Narayana Multispeciality Hospital, Mysore, first of its kind in the city Our hospital in Howrah successfully performed a complicated procedure involving Intra-Cardiac Repair for Tetralogy of Fallot along with a 37,000 600+ complete chest wall reconstruction on Angiograms Valve Repair a 2-year-old girl SS Narayana Heart Centre, Davangere corrected a rare adult heart defect known as ALCAPA-anomalous origin of the left coronary artery from the pulmonary artery World’s Largest Paediatric Cardiac Sciences Program 5,100+ 3,000 Congenital Heart Paediatric Cathlab Surgeries Procedures Annual Report 2017-18 11 Company Overview Statutory Reports Financial Statements Oncology Cancer is a growing menace in India. It is estimated that there are 2.5 mn patients in India and this number is increasing to the tune of 7 lakh every year. Overall, close to 5.5 lakh people die of cancer in India. Cancers in oral cavity and lungs in drugs become active and kill nearby position of the patient or the planned males and cervix and breast in females cancer cells. Photodynamic therapy radiation dose to be adjusted during account for over 50% of all cancer is used most often to treat or relieve treatment as needed. deaths in the country. The top five symptoms caused by skin cancer, cancers in men and women account for mycosis fungoides, and non-small cell Stereotactic Radiosurgery 47.2% of all cancers. lung cancer. Stereotactic radiosurgery (SRS) can deliver one or more high doses of The last decade has seen huge Radiation Therapy radiation to a small tumour. SRS uses advancement in the cancer therapy with A radiation oncologist develops a extremely accurate image-guided many new therapies now being tested patient’s treatment plan through a tumour targeting and patient positioning. in different stages for their efficacy to process called treatment planning, Therefore, a high dose of radiation can treat cancer. We, at Narayana Health, which begins with simulation. be given without excess damage to are trying to provide a spectrum of normal tissue. therapies in this speciality to provide After simulation, the radiation oncologist then determines the exact area that best-in class treatment. Stereotactic Body Radiation will be treated, the total radiation dose Therapy Cancer Treatment – that will be delivered to the tumour, Stereotactic body radiation therapy Growing Choices how much dose will be allowed for (SBRT) delivers radiation therapy in the normal tissues around the tumour, Cryosurgery fewer sessions, using smaller radiation and the safest angles (paths) for Cryosurgery is a type of treatment fields and higher doses than 3D-CRT in radiation delivery. in which extreme cold produced by most cases. By definition, SBRT treats liquid nitrogen or argon gas is used to tumours that lie outside the brain and Intensity Modulated Radiation destroy abnormal tissue. Cryosurgery spinal cord. are used to treat early-stage skin cancer, Therapy (IMRT) IMRT uses hundreds of tiny radiation retinoblastoma, and precancerous Internal Radiation Therapy – beam-shaping devices, called growths on the skin and cervix. Brachytherapy collimators, to deliver a single dose of Cryosurgery is also called cryotherapy. Internal radiation therapy radiation. The goal of IMRT is to increase (brachytherapy) is radiation delivered the radiation dose to the areas that Lasers from radiation sources (radioactive need it and reduce radiation exposure to This is a type of treatment in which materials) placed inside or on the body. specific sensitive areas of surrounding powerful beams of light are used to cut Several brachytherapy techniques are normal tissue. through tissue. Lasers can focus very used in cancer treatment. accurately on tiny areas, so they can be used for precise surgeries. Lasers Image-Guided Radiation can also be used to shrink or destroy Therapy (IGRT) tumours or growths that might turn In IGRT, repeated imaging scans into cancer. (CT, MRI, or PET) are performed during treatment. These imaging scans are Photodynamic Therapy processed by computers to identify Photodynamic therapy is a type of changes in a tumour’s size and location treatment that uses drugs which react due to treatment and to allow the to a certain type of light. When the tumour is exposed to this light, these 12 Narayana Hrudayalaya Limited The Head and Neck Services has utilised precision driven 3D planning in the management of tumours of the maxilla and mandible. This service is available at very limited centres. 23,000+ The focus is to enhance the Radiotherapy quality of reconstruction and Session provide optimal rehabilitation. This high-end service utilises the latest technology in Computer aided design (CAD) to pre- operatively assess the patient’s Cases disease, digitally plan the surgery in the jaws and similarly MSMC treated a rare cancer called Alveolar Soft Part Sarcoma of Pelvic the reconstruction and finally Bone. The affected part of the pelvic execute this with accuracy in bone was removed and replanted the operation theatre. Patient- 26,000+ after sterilising it via radiation through specific cutting guides are Chemotherapy a technique called Extra Corporeal printed preoperatively from Radiotherapy the CT images and utilised For the first time in Eastern India, a during surgery. This significantly patient was successfully treated with saves operation time and Flattering Filter-Free Radiotherapy in more importantly enhances Narayana Superspeciality Hospital, Howrah bolstering our reputation as a the outcomes in terms of form leading player in oncology and function. Coupled with Narayana Superspeciality Hospital, ablation and reconstruction, Howrah, the leading oncology provider our Head and Neck Centre in the eastern region, continued to also utilises this technology to perform cutting-edge clinical work rehabilitate the patients with 200+ across multi-speciality domains with implant supported dentures. BMT complex The planning and placement ‘Arterial Switch’ paediatric surgery of dental implants is also being performed to treat life-threatening performed simultaneously heart condition during the same operation RTIICS, Kolkata performed the to produce the maximum first advanced video assisted functional outcomes for the Thoracoscopy surgery in Eastern India patients. to treat lung cancer Annual Report 2017-18 13 Company Overview Statutory Reports Financial Statements Gastro Sciences Gastro Sciences is a highly specialised service split into gastrointestinal medicine and surgical expertise including transplants. We treat the upper digestive tract, stomach, liver, colon, intestinal problems and pancreas. Treatment here is specialised and covers Cases most conditions of the gastrointestinal tract, helping in early detection and 45-year-old patient admitted with prevention of gastrointestinal diseases. history of fainting attacks if he does not We understand the chronic and evolving eat every two hours. On evaluation, he nature of digestive disorders prevalent was found to have insulinoma in the in developing countries, and that is why 32,000+ region of pancreatic head. Excision of NH is at the forefront of diagnosis and the tumour was done. Now the patient treatment of gastrointestinal diseases Endoscopy has recovered well and no more has through minimally invasive technology. Procedure recurrent fainting attacks. We not only provide a wide range A 70-year-old male, with remote of service, but also practice quality history of colon cancer surgery, had parameters. Some of the quality a persistent paracardial lymph node parameters that we monitor are: for more than one year. EUS guided biopsy revealed recurrence. Patient Laparoscopic Cholecystectomy underwent surgery thereafter for oligo Rate: metastasis. Laparoscopic cholecystectomy remains the gold standard procedure in treating 40-year-old male de-compensated patients with gallstone disease. 5,400+ liver disease with obscure, overt Conversion to an open procedure gastrointestinal bleed and spontaneous is sometimes deemed necessary, Colonoscopy bacterial peritonitis was diagnosed to especially in complex cases in which have portal colopathy with an unusual a prolonged laparoscopic operative presentation of massive recurrent GI time is anticipated. Narayana Health bleed. After a stormy hospital course, promotes LC wherever its feasible to patient symptoms resolved with do so. In most of our hospital the rate is prolonged infusion of octreotide. nearly 100%. Endoscopy Complication Thousands of Indians every year undergo gastrointestinal (GI) endoscopic procedures, where a doctor inserts a tube-like instrument into the digestive 3,600+ tract, for instance to examine the anus, Cholecystectomy rectum, various parts of the intestines, the pharynx/throat, oesophagus or stomach, to look for signs of cancer, ulcers, and other symptoms. We capture complication during endoscopy as use it as a quality parameter to improve our clinical services. 14 Narayana Hrudayalaya Limited Robotic Surgery Robotic Surgery is a type of minimally invasive surgery. “Minimally invasive” means that instead of operating on patients through large incisions, we use miniaturised surgical instruments that fit through a series of quarter-inch incisions. When performing surgery with the da Vinci - the world’s most advanced surgical robot- these miniaturised instruments are mounted on three separate robotic arms, allowing the surgeon maximum range of motion and precision. The da Vinci’s fourth arm contains a magnified high-definition 3-D camera that guides the surgeon during the procedure. The surgeon controls these instruments of the console’s design, the surgeon’s and the camera from a console located eyes and hands are always perfectly in the operating room. Placing his aligned with his view of the surgical site, fingers into the master controls, he minimising surgeon fatigue. can operate all four arms of the da At Narayana Health, we are performing Vinci simultaneously while looking Robotic Surgery on some of the most through a stereoscopic high-definition complex cases in multiple speciality – monitor that literally places him inside Bariatric, Whipple, Gastro etc. the patient, giving him a better, more detailed 3-D view of the operating site Case than the human eye can provide. Every movement he makes with the master A one and half year-old boy from control is replicated precisely by the Iraq was facing issues related to robot. When necessary, the surgeon can obstruction to his left kidney (Pelvis- even change the scale of the robot’s ureteric junction obstruction). We movements: If he selects a three-to-one performed a robotic pyeloplasty 245 scale, the tip of the robot’s arm will move operation on this small child. The baby Robotic Surgeries just one inch for every three inches the made an excellent and rapid recovery surgeon’s hand moves. And because and was discharged home after 2 days. Transplant Program 610 13 9 Renal Transplant Liver Transplant Heart Transplant Annual Report 2017-18 15 Company Overview Statutory Reports Financial Statements Renal Sciences Given the exponential growth in diabetes and hypertension in India over the last two decades, the number of people suffering from renal diseases has increased manifold. At NH, we understood the immense burden of such a chronic health issue and made an affordable solution available for people across the social pyramid. Over 2.7 Lakh Hemodialysis sessions done in FY 2017-18 Haemoglobin and Mineral Maintenance Patients going through dialysis often find it difficult to maintain adequate haemoglobin or essential minerals such as sodium, potassium, Iron, etc. Our dialysis centres constantly investigate these vital numbers and guides patients effectively. These qualitative parameters are also compared with international program to ascertain the efficacy. The Department of Nephrology treats Quality control measures Case all types of acute and chronic kidney deployed at NH disorders. As part of our clinical care, A 25-year-old female had an open Urea Reduction Ratio we focus on three distinct areas - operation for right-sided PUJ URR stands for urea reduction ratio, chronic kidney disease (CKD), dialysis obstruction at her local hospital about meaning the reduction in urea as and transplant (renal replacement). 6 years back. She presented with a result of dialysis. The URR is one Our dialysis units have state-of-the-art similar complaints of right flank pain, measure of how effectively a dialysis equipment and treatment facilities and UTI and on evaluation showed a treatment removed waste products from work 24/7 to full capacity. A patient recurrent right PUJ obstruction. She the body and is commonly expressed with end-stage renal disease faces two underwent a major reconstructive as a percentage. Narayana Health challenges – the ongoing repetitive procedure called Laparoscopic continuously looks into patients who are cost of dialysis, including expensive ureterocalicostomy, where in ureter achieving more than 65% of URR. medicines and opportunity loss of two to is anastomosed to the lower pole of three days a week. kidney for good dependent drainage. 16 Narayana Hrudayalaya Limited Trauma and Orthopaedic Narayana Health provides comprehensive and world-class orthopaedic services. This department offers specialised care in the field of complex trauma, poly-trauma and related sub-specialities. Orthopaedic department at our hospitals deliver personalised care utilising latest research and evidence-based medicine. The department provides management related to disorders of bone, joint and a variety of musculoskeletal disorders. The demand for knee and hip replacement surgeries are increasing across Asia. The factors contributing to the rising demand include increasing awareness for possible treatments, growing elderly population and more patients with knee joint afflictions. Infection Rate after Joint 30-Day Readmission Rate Case Replacement following Joint Replacement Infection Rate after joint replacement Hospital readmission is a focus of Our doctors in Shimoga performed allows us to gauge the quality of care quality measures used by the hospitals a complex procedure on a 11-year- after Joint Replacement. Current worldwide to evaluate quality of care. old boy with crushed injury left leg. standard followed is 5.6% which is the Current standard followed is 3.3% for Doctors excised a significant area of benchmark set by Agency for Healthcare knee replacement and 5.6% for Total Hip Tibia and harvest vascularised fibula Research and Quality. Arthroplasty which is the benchmark set from opposite limb to fix the issue. by Centre for Medicare and Medicaid. 1,000+ 330+ 350+ Knee Hip Arthroscopy Replacement Replacement Annual Report 2017-18 17 Company Overview Statutory Reports Financial Statements Clinical Excellence through continuous improvement and monitoring Narayana Health Clinical Outcome Excellence “You can’t improve what you don’t measure”. Narayana Health is a strong proponent of this philosophy. We have developed a clinical balanced scorecard called Narayana Health Clinical Outcome Excellence or NHCOE. The balanced scorecard is comprised of 60 important parameters from 13 different areas such as Adult Cardiac Surgery, Paediatric Cardiac Surgery, Adult Cardiology, Paediatric Cardiology, Nephrology, Neurosciences, Trauma & Orthopaedics, Gastro Intestinal Sciences, Nursing, Hospital Infection Control etc. A committee headed by group chief of medical services continuously monitor these parameters and compare them with many national and international benchmarks, most of them being the leader in the respective areas. Finally, the hospitals are grouped into three different strata to curate our strategy for quality improvement. There are many benefits of such a system. 18 Narayana Hrudayalaya Limited NHCOE allows us to quickly determine the best practices in our different hospitals Allows us to track the overall improvement of a hospital over the time NHCOE also allows us to track practice variation in different hospitals NHCOE allows us to communicate progress of quality care to the non-clinical stakeholders Annual Report 2017-18 19 Company Overview Statutory Reports Financial Statements Patient safety responsible disposal of medical waste and vaccinations are provided whenever its necessary both in preemptive and non-preemptive form. A database of employees with vaccination expiry date is always available to keep our employees always vaccinated. Introduction of NAT – Patient Safety in Blood Transfusion Blood is vital to human life and across the world, millions of lives are saved through blood transfusions. However, the risk of receiving improperly tested blood is increasingly high even with Safe Surgery Checklist of surgical equipment using state-of- ongoing efforts to screen donated blood. Patients, especially those, who require The World Health Organisation the-art technology, targeted antibiotic transfusions regularly, are more at risk of published the WHO surgical safety prophylaxis, and many other practices getting infected with HIV or hepatitis B checklist and Implementation Manual that are followed in Narayana Health or hepatitis C if given blood that has not in 2008 to increase the safety of that improves that patient safety. These been tested correctly. patients undergoing surgery. An practices allow a huge role in protecting independent international study at 357 patient from contracting an infection All licensed blood banks in India are hospitals located in 58 countries has especially during complex surgeries like required by law to test blood before demonstrated that the use of a surgical CABG, Renal Transplant, etc. transfusing to patients. However, safety checklist has been associated Two-Identifier Policy of there are limitations in the widely used with a 38% lower odds of 30-day death Patient Identification serological tests (i.e. ELISA). Serological after emergency abdominal surgery tests take time as they detect anti- As an added measure of patient compared with the same operations bodies – the body’s response to a virus. safety Narayana Health has long performed at hospitals that didn’t have Since these viral infections take time to adopted mandatory two identifiers for a checklist. This is just one example of manifest, accurate results may not be important patient events such as patient improvement of patient safety. As the noted, and infected blood is transfused movement from ward to operation worldwide incident of traumatic injury, as safe blood. Individual Donor Nucleic theatre and vice versa, admission of non-communicable disease such as Acid Testing (ID-NAT) is the latest patients in the hospital, OT procedures. cardiovascular disease and cancers technological advance in ensuring the As a policy, MRN Number along with continue to rise, the surgical intervention safety of the nation’s blood supply. patient name or date of birth is used is also on the rise. Patients expect a as identification of patient. The result ID-NAT is a direct test which targets the safe environment in his/her entire stay in viral DNA/RNA. As a result, windows hospital. shows. We didn’t have wrong patient or wrong site surgery safety violation event period for testing positive comes down Narayana Health uses a slightly in our hospital in the last year. severely. Narayana Health has taken the different form of safe surgery checklist positive step of introducing the Nucleic in its operating theatre. We have Safety at work Acid Testing to take transfusion safety painstakingly built systems and software We pay a lot of attention into employee’s to next level. Overall, fewer than 100 that enforces the implementation of health. We take “Safety as work” blood banks in India have ID-NAT facility checklist in all operating theatre. Other very seriously. Personal protective for safe blood transfusion. There are than surgery checklist, sterilisation equipment, safe infusion practice, multiple benefits of ID-NAT. 20 Narayana Hrudayalaya Limited ID-NAT is the most sensitive and ID-NAT complements serological ID-NAT prevents spread of HIV/AIDS specific test for detecting HIV, HCV screening by providing an additional and Hepatitis by significantly reducing and HBV infections in the blood. layer of safety to blood supply, the window period, resulting in fewer It has raised the bar in blood particularly in regions of high Transfusion Transmitted Infections transfusion safety prevalence like India and safer blood ID-NAT not only prevents ID-NAT reduces risk of Transfusion Improves confidence in the transfusion of window period Transmitted Infection among hospital’s blood supply by infections but also detects occult multi-transfused patients like detecting false negative serology infections (chronic cases) where Thalassaemic and those with cancer results no antibodies are present and mutant viruses (where the virus has modified its structure) Window Period Individual Nucleic Acid Testing NAT vs. Serology NAT tested blood is safest in the world NAT NAT NAT detects HIV in 8 days Window Period detects HIV 8 days earlier than Serology testing Traditional/Serology Serology 16 days Window Period detects HIV in NAT NAT detects Hepatitis B detects HBV in 27 days 15 days earlier than Serology testing Serology 42 days detects HBV in NAT NAT detects Hepatitis C detects HBV in 5 days 55 days earlier than Serology testing Serology 60 days detects HBV in Barcoding of Laboratory error. However, barcodes supply an has dramatically reduced misplaced Sample and Medicine easy-to-use and cost-effective solution samples and wrong identification of With the amount of patient safety to these current problems. Barcodes samples. Moreover, it has contributed challenges facing modern healthcare, enable quick, accurate data entry for the heavily on the patient safety. healthcare industry, allowing time to be it’s difficult for the industry to manage Another important step that we spent increasing efficiencies instead of information. Everyday hospitals deal have taken is to barcoded medicine manually entering data. with inventory complications, tracking administration in our outpatient materials, and patient validation. Not Narayana Health has adopted pharmacies. This has resulted in only is this time-consuming to perform complete bar code identification policy smoother operations and correct manually, it also allows for human for patient Laboratory samples. This delivery of drugs. Annual Report 2017-18 21 Company Overview Statutory Reports Financial Statements SMAC Social Mobile Analytics and Cloud SMAC (Social, Mobile, Analytics and Cloud) is the concept that the convergence of four technologies is currently driving business of five moments of Hand Hygiene. The central committee responsible for NHCOE also regularly tracks the hand hygiene compliance. Good hand hygiene practice prevents patients from contracting healthcare associated infection. Incident Management Mobile App Over the last 10 years, more attention has been paid to embedding safety throughout the health system. Research conducted in the United States related to unintended damage and death in hospitals was an important catalyst in the process. This research was fundamental to the publication in the year 2000 of a report entitled “To err is human: Building a safer health system”. In 2005, the World Health Organisation (WHO) published guidelines related to the reporting of and learning from SMAC technologies hold great potential While social media helps communicating incidents. Based on the development to help health care organisations value to the population, we believe and regulations in a large number of reduce costs, streamline inefficiencies, Mobile, Analytics and Cloud hold even countries around the world, the WHO improve quality, and demonstrate value. greater potential. Almost five year ago report contained numerous proposals Experience with SMAC in industries such we were one of the first healthcare for the establishment and structure as entertainment, consumer goods, and delivery company to adopt cloud of systems to facilitate safe incident banking shows that while each of these technology. Today, we are using mobile reporting. technologies can generate benefits and analytics more than ever. Another important development on the independently, they are even better Hand Hygiene through international stage was the publication together - joint application can improve of the Luxembourg Declaration of business processes dramatically. Mobile App Practicing hand hygiene is a simple Patient Safety in April 2005. This In health care, this may translate to yet effective way to prevent infections. declaration was formulated during a increased efficiency and lower costs. Although Healthcare Institutions are conference on patient safety, organised by the European Union. This statement Narayana Health use social media to stay very complex organisations in nature, contained a number of explicit in touch with the population. We reach but good hand hygiene practice is recommendation about safe incident out to population with health information, the simplest step that can be taken reporting. They read as follows. news update and warning messages. As to improve patient safety. We take a result, we are one of the most followed hand hygiene very seriously. We use “The conference recommends to the healthcare brand in social media. mobile app to track the compliance National authorities: 22 Narayana Hrudayalaya Limited To consider the benefits of a national Healthcare Incident Management Telehealth Suite: voluntary confidential reporting system mobile app. Technology meets of adverse events and near misses. They are encouraged to report all Health Care To create a culture that focuses incidents from minor to extremely Telehealth is the use of digital on learning from near misses and sentinel. Many benefits of such a information and communication adverse events as opposed to system are enumerated below. technologies, such as computers and concentrating on “blame and shame” mobile devices, to access health care It creates a learning platform for the and subsequent punishment”. services remotely and manage your hospitals as the incidents are analysed health care. These may be technologies While there has not been any national in regular interval and “lessons you use from home or that your doctor direction on this front, Narayana learnt from mistake” are shared with uses to improve or support health care Health has taken the patient safety to everyone else. services. a different level. Incident Management In today’s world, mobiles are is not new to our organisation, but Narayana Health has been in the ubiquitous and easily accessible the strategic approach to it has business of providing Telehealth solution by everyone. It facilitates in faster become increasingly professional. The for a long time, making us one of the resolution of the incident. digitisation of reporting, registering biggest Telehealth service provider. and analysing incidents has positively One of the biggest inefficiencies In recent times, we have partnered contributed to our patient safety in any organisation is inter- with CISCO to provide telemedicine culture. departmental communication. Out to different areas of the city which are healthcare incident management directly not catered by our hospitals as In Narayana Health, all nurses, system promotes inter-departmental well as some of the remotest part of administration personnel, paramedical cooperation and faster resolution of India. professionals and doctors are given Healthcare-related incidents. access to indigenously designed Launch of Virtual Oncology Clinic – Through Launch of Tele Psychology Clinic – Narayana this clinic, Narayana Health (NH) will provide Health has launched a unique initiative called superspeciality consultation to oncology Tele Psychology. Under this initiative, there will patients across east network hospitals, who be backend hospital which will be providing are unable to visit NSH Howrah service for front end hospital. We expect that this will address the shortage of mental health doctors in remote areas Annual Report 2017-18 23 Company Overview Statutory Reports Financial Statements Clinical Analytics One of the most important element of SMAC stack is Analytics. With continuous changes in the industry through government intervention and macroeconomic conditions change it has been paramount that we continuously innovate ourselves to reduce cost and improve quality. Clinical analytics provide insights into this process. One of the biggest area in this is the appropriate antibiotic usage in clinical areas. Our indigenously built antibiotics administration dashboard lives of millions of patients each year ureters, and kidney. UTIs are the most along with automated infection and contribute to the spread of antibiotic common type of healthcare-associated data dashboard provides real-time resistance. infection reported. Among UTIs acquired information on appropriateness of in the hospital, approximately 75% We monitor surgical site infection as antibiotic medication along with the are associated with a urinary catheter, it helps reduce hospital days for the correlation of high end antibiotics with which is a tube inserted into the patient while improving outcomes infection. Other than the above, clinical bladder through the urethra to drain after surgery. The data helps us find analytics gives us detailed information urine. Between 15-25% of hospitalised out patterns of contracting such about infection bundle to reduce patients receive urinary catheters during infection and help in data analysis and Healthcare Associated Infection. their hospital stay. The most important benchmark ourselves. Defined Daily Dose (DDD) risk factor for developing a catheter- Ventilator Associated The DDD is the assumed average associated UTI (CAUTI) is prolonged use Pneumonia (VAP) maintenance dose per day for a drug of the urinary catheter. Ventilator-associated pneumonia used for its main indication in adults. The The data helps institute best practices to (VAP) is pneumonia that develops DDD is a unit of measurement and does prevent healthcare-acquired UTI and to 48 hours or longer after mechanical not necessarily reflect the recommended reduce the number of catheter days for a ventilation is given by means of an or Prescribed Daily Dose. Therapeutic patient. We monitor compliance with the endotracheal tube or tracheostomy. doses for individual patients and patient external benchmark. Ventilator-associated pneumonia (VAP) groups will often differ from the DDD results from the invasion of the lower Central Line Associated Blood as they will be based on individual respiratory tract and lung parenchyma Stream Infection characteristics (such as age, weight, by microorganisms. A central line-associated bloodstream ethnic differences, type and severity infection (CLABSI) is a serious of disease) and pharmacokinetic We monitor VAP for 1000 ventilator days infection that occurs when germs considerations. using the National Healthcare Safety (usually bacteria or viruses) enter the Network Benchmark at 0.9 VAP per WHO recommends measurement bloodstream through the central line. 1000 ventilator patient days. The data of antibiotic administration in DDD. Healthcare providers must follow a helps identify the risk factors and reduce We have adopted the framework and strict protocol when inserting the line to the airway infection for all patients with all our hospitals, along with different make sure the line remains sterile and ventilator support. In addition, VAP areas are rated in DDD on antibiotic a CLABSI does not occur. In addition monitoring helps to lessen the prolonged administration. Some of the world’s to inserting the central line properly, time spent on the ventilator, length of most advanced countries publish their healthcare providers must use stringent ICU stay and length of hospital stay after result of antibiotic consumption. It helps infection control practices each time they discharge from the ICU. us to compare our result and improve check the line or change the dressing. ourselves. Catheter related Urinary Tract We monitor CLABSI for 1000 Central Surgical Site Infection Control Infection (CAUTI) Line Days using the National Healthcare A urinary tract infection (UTI) is an Surgical site infections are caused by Safety Network Benchmark at 1.1 VAP infection involving any part of the urinary bacteria that get in through incisions per 1000 central line days. system, including urethra, bladder, made during surgery. They threaten the 24 Narayana Hrudayalaya Limited REACHING NEW MILESTONE IN Services Awards and Recognitions NH won BW Business World Digital at the National Award for Marketing NH won “The Express Healthcare India Award for “Most Innovative Excellence presented by Times Excellence Award 2017” in Health Citizen Engagement through Network in September 2017 Tourism category in September 2017 Technology” in May 2017 Narayana Institute of Cardiac Narayana Health was included NH featured in “India’s Top 500 Sciences, Bengaluru was listed among the Top 10 Most Innovative Companies 2017” list by Dun & among “The Most Trusted Hospitals” Companies in India by Fast Bradstreet in June 2017 in Bangalore by Reader’s Digest in Company (an American business NH won The Economic Times “The September 2017 magazine) in in March 2018 Best Asian Healthcare Brands 2017” Dharamshila Narayana Superspeciality NH won “The Health Brand of the award in September 2017 Hospital, Delhi was listed among Year in Healthcare” at the India SRCC Children’s Hospital won “The Most Trusted Hospitals” for Health & Wellness Awards in “The Best Emerging Brand” award oncology in Delhi by Reader’s Digest December 2017 in September 2017 New Equipment Single plane low radiation Cathlab Endoscopic Ultrasound system with capability of cardiac MRI to System for Neuro & Vascular - Endo-Sono and high end enhance the diagnostic services interventional procedures, Model endoscopic system, Make Pentax 128 Slice CT scan, Model Ingenuity, Allura Clarity FD20 for MSMC for NH Dharamshila Hospital Make Philips for NSH Gurugram Bangalore and NSH Gurugram Endoscopic Ultrasound system Hospital Single plane low radiation Cathlab - Endo-Sono and high end Neuro, Spine and Ortho Navigation System, Model Allura Clarity FD10 endoscopic system, Make Olympus System, Model Nav3i, Make Stryker for Ahmedabad NH Hospital and for NSH Gurugram for NSH Gurugram Hospital NSH Gurugram High end MRI 3.0 T, Model Ingenia Cx, Make Philips for NSH Gurugram Tie-Ups Empanelment of RTIICS, Kolkata Empanelment of SRCC Mumbai Empanelment of MSMC, Bengaluru with Border Security Forces, with Mumbai Police department, with BHEL, GAIL, ISRO and NMDC Calcutta Journalists Club, Federation Government of Assam and of Small and Medium Industries Government of Madhya Pradesh Annual Report 2017-18 25 Company Overview Statutory Reports Financial Statements Board of Directors Dr. Devi Prasad Shetty Dr. Devi Prasad Shetty is the Chairman of our Company and also an Executive Director. He is a cardiac surgeon with around 35 years of experience. After completing his MBBS from University of Mysore in 1978 and master’s degree in 1982, he was granted a fellowship from the Royal College of Surgeons of England in 1989. He established Narayana Hrudayalaya in the year 2000. Dr. Shetty is also a recipient of honorary Doctorates from University of Minnesota in 2011, from Rajiv Gandhi University of Health Sciences in 2014 and from IIT Madras also in 2014. Dr. Shetty initiated the concept of “Micro Health Insurance Scheme” in Karnataka, which eventually led to the Karnataka government implementing the Yeshasvini Scheme, a Micro Health Insurance Scheme for Rural Farmers. Dr. Shetty is a Professor at Rajiv Gandhi University of Medical Sciences, Bengaluru, India and University of Minnesota Medical School, USA. He is a Recipient of a number of awards and honours most noteworthy being “Padma Shri and Padma Bhushan” Award in 2003 and 2012 respectively, conferred by the Government of India and the Rajyotsava Award in 2002 conferred by the Government of Karnataka. He received the ‘19th Nikkei Asia Prize, Economic and Business Innovation’ by Nikkei Inc. in 2014. He is an active member of the European Association for Cardio-Thoracic Surgery since 1996 and a life member of the Indian Medical Association. He was also a member of the Finance Committee of the 47th Annual Conference of the Indian Association of Cardiovascular and Thoracic Surgeons. He was a member of the governing body of the Medical Council of India between 2010 and 2011. Dr. Shetty is routinely invited for his advise and opinion on healthcare policies by Government of India, different states in India and recently by Government of Japan on Healthcare initiatives for G20 Summit. Dr. Ashutosh Raghuvanshi Dr. Ashutosh Raghuvanshi is the Vice Chairman, Group CEO & Managing Director of our Company. He is a cardiac surgeon with overall experience of 27 years and has played a pivotal role in building a strong team by identifying the right mix of people who have worked together in fostering NH’s success story. It has been only under his able stewardship that from a single hospital in Bangaluru NH has become one of the leading Healthcare providers in India. He was honoured as the “CEO of the Year” in Health Care Leadership Awards, 2015 organised by Stars Group. Dr. Raghuvanshi completed his postgraduation in cardiac surgery from the University of Mumbai - post his M.B.B.S and M.S in general surgery. He has worked at several renowned hospitals in Mumbai including Balabhai Nanavati Hospital, Breach Candy Hospital and Research Centre, amongst others, Apollo Hospitals in Chennai and Manipal Heart Foundation in Bengaluru before joining NH. A strong clinical background merged with true business sense makes him one of the most coveted Healthcare Leader. 26 Narayana Hrudayalaya Limited Mr. Viren Shetty Mr. Viren Shetty is an Executive Director of our Company. He graduated from RV College of Engineering and has an MBA from Stanford Graduate School of Business. Mr. Viren joined Hospital Engineering Services department of Narayana Health in 2004. He is currently responsible for the strategy function at Narayana Health and is involved in identifying new growth opportunities for the Group. Ms. Kiran Mazumdar Shaw Ms. Kiran Mazumdar Shaw is a non-Executive Director of our Company. She is the Chairperson and Managing Director of Biocon Limited, an innovation led Biopharmaceutical Company, which is India’s largest publicly listed biotech enterprise. A first-generation entrepreneur with more than 43 years’ of experience in the field of biotechnology. She holds a bachelor’s degree in Science (Zoology Honours) from Bengaluru University and a masters’ degree in Malting and Brewing from Ballarat College, Melbourne University, Australia. She has also been awarded several honorary degrees, including Honorary Doctorate of Science from Ballarat University, National University of Ireland, Trinity College, Dublin and the University of Glasgow. She has several national & international recognitions to her credit, the most noteworthy being the ‘Padma Shri’ and the ‘Padma Bhushan’ in 1989 and 2005, respectively, conferred by the Government of India. She has also been conferred with the highest French distinction - Chevalier de l’Ordre National de la Légion d’Honneur (Knight of the Legion of Honour) in 2016. She has been named among the most influential people by reputed international magazines. She is an independent Member of the board of Infosys. She is a founder member of Karnataka’s Vision Group on Biotechnology and currently chairs this forum. She had also setup the Association of Biotech Led Enterprises (ABLE) in 2003 as its first President and currently she is Non-Executive Chairperson. She is also the Member of the Governing Council of National Institute of Immunology and National Biopharma Mission Steering Committee, both constituted by the Dept. of Biotechnology, Govt. of India. Annual Report 2017-18 27 Company Overview Statutory Reports Financial Statements Board of Directors Mr. Dinesh Krishna Swamy Mr. Dinesh Krishna Swamy is an Independent Director of our Company. He is a professional with around 30 plus years of experience. He received a bachelor’s degree from the Government Science College, Bengaluru in 1971. Thereafter, he was granted a master’s degree in Mathematics from Bengaluru University, followed by his honorary doctorate in literature from the Karnataka State Open University in 2007. In 1981, Mr. Dinesh Krishna Swamy became a founding member of Infosys Limited. Since its founding, he has held various positions such as, a board member, head of Quality, Information systems, head of the Communication Design group and Chairman of Infosys Australia. He holds the position of the President of Infosys Science Foundation, Trustee of Centre for Brain Research at Indian Institute of Science, Bengaluru. Mr. Muthuraman Balasubramanian Mr. Muthuraman Balasubramanian is an Independent Director of our Company. He has been on the board of several companies and educational institutions. He is a professional with over around 49 years of experience. He holds a bachelor’s degree in metallurgical engineering from Indian Institute of Technology, Madras and a master’s degree in business administration from the Xavier Labour Relations Institute, Jamshedpur. Muthuraman joined Tata Steel Limited in 1966 and has held various positions at Tata Steel Limited including Vice-President (Marketing and Sales) and Vice President (Cold Rolling Mill Projects) and Managing Director. He retired from Tata Steel Limited as Vice Chairman. He served on the board of Bosch India Limited for six years. He was also on the board of directors of Tata Industries Limited. He was the chairman of the Board of Governors of the Indian Institute of Technology, Kharagpur, National Institute of Technology, Jamshedpur and Xavier’s Labour Relations Institute, Jamshedpur. Currently, he is also on the board of directors of Sundaram Fasteners Limited and Ashirvad Pipes Private Limited. Muthuraman has been conferred with the prestigious ‘Padma Bhushan’ award in 2012, from the Government of India. He received the Tata Gold Medal in 2002 from the Indian Institute of Metals, Calcutta for his significant contribution to the metallurgical industries particularly to iron and steel industry. 28 Narayana Hrudayalaya Limited Mr. Arun Seth Mr. Arun Seth is an Independent Director of our Company. He is an alumnus of IIT Kanpur and IIM Calcutta. He has worked in senior commercial positions in the HCL, Usha Martin and the UB Group, in the last 40 years. He was a Managing Director of British Telecom since 1995 and retired as Non-Executive Chairman of British Telecom in India in 2012. He was also on the board of Airtel and Tech Mahindra, Samtel Avionics Ltd and Intex Technologies Ltd. He took early retirement to focus on bringing the benefits of IT and Telecom to the real-world businesses i.e. energy, health, fintech and payments, hospitality, retail etc. and helps create a vibrant entrepreneurial system. Currently he is also an independent Director on the board of various companies including listed company like Jubilant Foodworks Ltd. He is currently on the Nasscom product Council and in the past he has served on the Executive Committee for Nasscom for the last 10 years. He is an Advisory board member of TERI and a Governing member of the TERI University board. He was on the board of IIM Lucknow and IIT Delhi and retired in March 2016. Mr. B N Subramanya Mr. B N Subramanya is an Independent Director of our Company. Mr. Subramanya holds a bachelor’s degree in commerce from Bengaluru University. He became an associate member of the Indian Institute of Chartered Accountants of India in the year 1982. He has around 31 years of experience. He began his career with Varsons Chemicals Private Limited wherein he worked as the general manager, finance for a period of four years. He is a fellow member at ICAI since April 13, 1994. He has been a member of the board at M.S. Ramaiah University of Applied Sciences, M.S. Ramaiah – HCG Cancer Centre and Governing Council of International Medical School, Bengaluru. Currently, he is also on the board of directors of Red Couch Interactive (India) Private Limited and QS-Era India Private Limited. Mr. Manohar D Chatlani Mr. Manohar D Chatlani is an Independent Director of our Company. He is the founder and chairman of Bangalore-based MD Retail India Private Ltd, which owns and operates the Men’s Favorite Shop and SOCH fashion & lifestyle retail chains. With immense passion for retail and experience of more than 45 years in retail sector, business development, leadership roles he brings strong commercial experience and in-depth knowledge of the Indian retail market. He is also on the board of Queencity Developers Private Limited and The Bangalore Commercial Association. Annual Report 2017-18 29 Company Overview Statutory Reports Financial Statements Management Discussion and Analysis 21% Y-o-Y revenue growth during FY 2017-18 30 Narayana Hrudayalaya Limited Company Overview With “Healthcare for All, All for Healthcare” commissioning of Gurugram Hospital Delving into international operations, objective, NH started out on a mission in coupled with transformation of we started Cayman Islands Hospital 2000 to provide affordable healthcare Dharamshila Cancer Care Unit to a with the idea of providing world- across the spectrum of population. tertiary multi-speciality hospital will play class tertiary care to the historically Patient-Centricity is deeply ingrained in a crucial role in evolution of the northern underserved Caribbean market. We are the DNA of NH and this focus on patients’ cluster which already has our Jammu proud today that our strategy of offering requirements arising out of our strong unit operational for almost 2 years. high quality and affordable care has understanding of patients’ needs helps The strategic location of our Gurugram brought great success and recognition us to be a true differentiator in the Indian facility supplemented by state-of-the- across the region. Cayman Islands unit healthcare landscape. With this goal in art medical technology deployed there registered a revenue growth of ~37% makes it an ideal fit for patients looking mind, we have been expanding in various YoY with a phenomenal (FY15-FY18) out for premium healthcare services with regions which are of strategic interest CAGR of ~79% and EBITDA margin of an element of affordability. to us. ~14% in FY18. This unit’s capability of attracting patients across the Caribbean Narrowing down to fiscal year 2018, we With Delhi NCR and Mumbai regions region could be a game changer for NH. are pleased to report remarkable results now a part of vibrant NH umbrella, we With Cayman’s success, we continue both on financial and operational front. have projected ourselves as a Pan-India to scout for opportunities globally At the consolidated level, the Company st healthcare provider. As of 1 May 2018, reported an industry leading, impressive which could create a synergistic impact NH operates 24 hospitals, 7 heart centres growth of ~21%. On the profitability front, with a well laid-out strategy which and 19 primary care facilities and a multi- we are delighted with the performance limits our capital outlay coupled with speciality hospital in Cayman Islands as it has been achieved with our newly frugal innovation in operations and adding up to 6,232 operational beds and commissioned facilities just in their first supply chains. 7,273 capacity beds. year of operation. Business was also impacted by price cap on cardiac stents, It is really a feather in our cap when With dominance in southern, eastern knee implants and introduction of GST. it comes to clinical expertise, we clusters and emerging presence in Notwithstanding the impact of these continue to take challenging medical northern and western regions, NH is transient ripples, profitability margins are cases and register best-in-class progressing along to be a true Pan- quite impressive highlighting the NH’s clinical outcomes so as to be a great India healthcare provider. Recent growth story. medial institution. Some of our achievements in clinical excellence are highlighted below: Mazumdar Shaw Medical Centre SMVDNSH, Jammu performed the 1 (MSMC), Bengaluru successfully 2 first case of Endovascular Aortic separated conjoined twins. This Repair. This is the first case of its kind medical problem is a rare event, in the region. This establishes our occurring once in ~100,000 births pre-eminence in performing cutting and the survival rate is also very low edge cardio-vascular procedures Our hospital in Mumbai performed For the first time in Eastern 3 Extracorporeal Membrane 4 India, a patient was successfully Oxygenation (ECMO) on a little girl treated with Flattering Filter- suffering from H1N1 and severe Free Radiotherapy in Narayana hypoxemic respiratory failure, the Superspeciality Hospital, Howrah, procedure being first of its kind in bolstering our reputation as a a paediatric case in Mumbai leading player in oncology Annual Report 2017-18 31 Company Overview Statutory Reports Financial Statements Business Review More than 5 years’ bucket NH’s matured facilities continue to shine and this is evident from the fact that they have delivered revenue growth of ~12% on a year-on-year basis. The ability to consistently translate this high revenue growth into best-in-class EBITDAR margins of ~22% speaks volumes of our operational excellence, achieved over the years. This bucket continues to register healthy average realisations which are at ~` 8.0 mn with an average occupancy of 65% signalling a large scope for ramp-up. The Three Firmest Pillars of NH Clinical Intervention-led Growth MSMC, housed in Health City, Bengaluru Close to 7-year-old facility, Raipur though driven by tertiary and quaternary services started slowly but has picked-up nicely such as Bone Marrow Transplant, over the past 3-4 years. With partner’s introduction of Da Vinci Robotics, grew investment in civil infrastructure and our at a stupendous 20%. Its sister facility investment in medical equipment, we i.e. NICS, Bengaluru registered an are aiming to commission a radiation impressive 12% growth, despite being a oncology block this fiscal. It is heartening ~12% clinical behemoth in terms of sheer size to say that our Mysore unit has received and number of beds catering to just one very strong patient traction since its Y-o-Y revenue growth speciality i.e. Cardiac Sciences. inception and to cater to the burgeoning registered in NH’s patients’ needs, we have started civil matured facilities Yet again this year, RTIICS Kolkata work on putting-up a new block. At our operated at the highest levels of Jaipur unit, we are in the process of occupancy (~85%). This accomplishment, commissioning a radiation oncology despite the challenging and unpredictable block. regulatory regime in West Bengal points towards the eminent stature RTIICS has gained over the years. This is testament to the faith of people in NH’s capabilities to provide quality healthcare services. 32 Narayana Hrudayalaya Limited 3-5 years’ bucket Tailor-made Approach towards Payee Profile While NH’s performance is centred around its matured facilities, but the younger We have restructured operations at our set of hospitals such as facilities in Guwahati, HSR and Whitefield have also HSR unit a bit in line with a secondary shown promising results by growing at impressive rates on a year-on-year neighbourhood hospital. Our Whitefield basis. The pace of ramp-up and profitability at these units is something we facility, being present in a highly affluent did not envision at the onset of operations. With increase in occupancy levels, region, is amongst the highest ARPOB supported by inherent operating leverage, we expect 8.4% EBITDAR margins units of our network with ARPOB in FY18 of this bucket to converge to those registered by our matured facilities. surpassing ` 10 mn. We continue to With this bucket inching towards matured operations along with a strong brand remain bullish on it going forward and are pull, the hospitals in this category enjoy in their respective regions, average in advanced stages of capacity expansion realisations are at ` 9.5 mn and occupancy at 57%. by setting up 150-bedded new block. Less than 3 years’ bucket This bucket houses our newest additions to the NH’s vibrant umbrella of operations. It includes our unit up north in Jammu which is now a 2-years-old facility along with our one of its kind recently commissioned children-only facility in Mumbai and a recently commissioned multispeciality facility in Gurugram. Budding Facilities but Promising in Mumbai performed Extracorporeal Signs of Growth Membrane Oxygenation (ECMO) on Though the hospitals in this category a little girl suffering from H1N1 and are still in nascent stages of their severe hypoxemic respiratory failure, operational life-cycle but the fact that the procedure being first of its kind in a NH has managed to penetrate two of paediatric case in Mumbai, highlights the the most affluent markets of Delhi NCR clinical expertise we have. and Mumbai highlights the importance of existence of these hospitals. The Our Jammu facility, despite being in response till date has been quite challenging terrain, is growing at a healthy phenomenal due to their prime locations, rate and has shown strong occupancy catering to large catchment areas and ramp-up. affluent payee profile. Our recently commissioned multispeciality We expect SRCC Mumbai, one of its kind hospital in Gurugram which is in close Children-only facility, to take the normal proximity to Indira Gandhi International time for ramping up, but cardiac services Airport, New Delhi will leverage on department has shown healthy signs of India’s burgeoning medical tourism traction led by our tie-up with the Assam industry and thus attract international Government. Through government and patients. Its world-class medical and civil institutional associations, we are working infrastructure buoyed by the best clinical on treating patients in other specialties talent will act as an enabling force to help as well. Cases such as our hospital strengthen NH its footprints in the region. Annual Report 2017-18 33 Company Overview Statutory Reports Financial Statements Acquired Operations Besides these hospitals, we also operate 7 heart centres and 19 primary healthcare Inorganic route has remained an important pillar of NH’s growth and this bodes facilities. Our clinic in Langford Town, well by the fact that this bucket currently comprises ~15% of group’s total Bengaluru is the latest entrant in our hospital operational beds and ~13% of total hospital revenues. By gaining network. Equipped with most of the access to these operational facilities, we managed to minimise the time-to- Lab & Diagnostics equipment such market and gain significant head start in respective geographies, which is not as X-RAY, ECG, TMT, ECHO, EEG & the case in greenfield projects. USG, this hybrid clinic provides service offerings ranging from OPD consultation to day care services such as dialysis, Growing Eminence in Eastern NH Projects itself on the chemotherapy, endoscopy etc. This clinic India Country Map predominantly caters to high income In FY 2013-14, NH added Westbank Before forging partnership with group population in upmarket residential units to its network with an aim to Dharamshila Cancer Foundation and locality of Bengaluru. We expect this gain greater foothold in Eastern India, Research Centre, NH’s presence in facility to emerge as an important referral centred around Kolkata. Since then, Northern India was limited only to point for our Health City, Bengaluru. Westbank has evolved as a Centre of Jammu. Having already expanded Excellence and a leading Oncology service offerings at Dharamshila The successful operations across player in Eastern India. Buoyed facility to include Orthopaedics, categories encourage us to work hard by the strong patients’ response Neuro Surgery, Nephrology, Kidney even more and continuously explore new from neighbouring areas including Transplant, Urology, GI Sciences, we avenues to achieve the goal of becoming Bangladesh, we commissioned 2nd are progressing well on transforming a preferred healthcare partner for LINAC at Westbank in June 2017. this Oncology focussed unit, with patients, doctors, insurance company, strong track record of close to two government establishments etc. decades, into a multispeciality hospital. This is also in line with our business model to de-risk our business from single-speciality. 34 Narayana Hrudayalaya Limited India Hospital Network As on May 1st 2018, we operate 24 hospitals in India. Engagement Comments Number of Number of Gross Block Capital Cost per framework Units Operational Beds + CWIP Bed (INR Mn) (INR Mn)1 Owned OR Long Owns and operates on freehold 9 hospitals 2,918 12,498 4.3 Term / Perpetual basis OR land taken on long Lease term / perpetual lease Revenue Share / Operates and pays a revenue 10 hospitals 1,903 3,596 1.9 Rentals share / rent to owner of the hospital Public-Private Operates with nominal 2 hospitals 337 190 0.6 Partnership investment in partnership with public entities Managed Provides healthcare services to 3 hospitals 587 – – Hospitals third parties for a management fee Heart Centres Runs cardiac sciences’ 7 Heart 381 566 1.5 department out of 3rd party Centres and hospitals & pays revenue share 1 Clinic 1 Figures exclude cash and non-cash government grant of ~INR 1,500 Mn and a non-cash lease provision of ~` 1,062 Mn which form the part of total Gross Block as per Ind AS. Operating Performance Fiscal year 2018 was a noteworthy year flagship facilities has been tremendously care along with tapping the international for us on multiple counts. From expanding successful, as for the first time ever, their lucrative patients’ base resulted in our reach in northern and western clusters contribution to the group’s revenues has improvement in realisations which led to to increasing our stake to 100% in Cayman come down below ~50% in Q4 FY18. ARPOB at ` 8.0 mn in FY18 from ` 5.8 Islands Hospital, it has been a year filled Our endeavours to project ourselves as mn in FY15. with key milestones. With the expansion a multi-speciality health provider has exercise under the theme “unfolding resulted in strengthening of other pillars The group witnessed a strong uptick in India’s play”, recent commissioning of of strength apart from cardiac sciences average occupied beds at 2,725 in FY18 our Gurugram hospital has added the which now accounts for ~42% from majorly due to the expansion exercise necessary muscle to our budding northern ~55% in 2015 with other specialities we undertook in North and West India cluster and is anticipated to leverage on catching up such as gastro sciences now along with strong occupancy ramp-up the operational synergies to be created at 15%, oncology now contribute~10% across our other network hospitals. With by it being in proximity to Dharamshila with neuro sciences and renal sciences attracting international patients in the Hospital. not far behind at 8% and 8% respectively. network on the radar for quite sometime, This strategy of creating Centre of we are pleased with the progress this Our de-risking exercise centred around Excellences around other specialities payor category has reported with ~10% decreasing our reliance on three and emphasising on advanced medical contribution to revenues. Annual Report 2017-18 35 Company Overview Statutory Reports Financial Statements Key Figures of Balance Sheet Statement (` in million) Consolidated Figures NH India NCHL Consolidated Consolidated Figures FY 16-17 * FY 17-18 FY 17-18 FY 17-18 Long-Term Borrowings 1,798 4,940 2,023 6,963 Short-Term Borrowings 90 376 - 376 Trade Payables 2,066 2,692 270 2,962 Gross Tangible Assets 14,439 18,538 3,706 22,244 Trade Receivables 1,569 2,219 571 2,790 Inventories 524 588 248 836 * Figures of HCCI were not consolidated in FY16-17. NH India Balance Sheet Trade Payables Care Hospital has led to creation of non- Review The trade payables have increased from cash lease provision of `1,062 mn which Long -Term Borrowings ` 2,066 mn in 2016-17 to ` 2,692 mn in has further bloated up the Gross Block. The movement in the Long-Term Borrowing 2017-18 due to increase in the volume As per the IND AS, a government grant of the company from `1,798 mn to `4,940 of business done during the year as the may take the form of transfer of a non- mn is on account of funding the Gurugram growth in revenues was quite robust in monetary asset such as land and other transaction wherein we acquired a near 2017-18 over the last year. resources, for the use of the entity. In complete hospital in Gurugram, funding of these circumstances, the fair value of the Cayman Islands’ transaction in which Assets non-monetary assets is assessed, and we acquired the entire partner’s stake in Gross Tangible Assets both the grant and asset are accounted HCCI. These transactions were a part of Gross Tangible Assets increased from at that fair value. The impact of this a well-thought through exercise aimed ` 14,439 mn in 2016-17 to ` 18,538 mn in grant is on account of land in Narayana at expanding into crucial market of Delhi 2017-18. Bulk of this increase is attributed Multispeciality Hospital, Jaipur, Narayana NCR which is termed as India’s medical towards addition of new facilities to the Multispeciality Hospital, Ahmedabad and tourism hub and Cayman transaction is a group’s umbrella i.e. commissioning building in Narayana Superspeciality part of global ambition to project NH as an of facilities in Delhi NCR and Mumbai, Hospital, Guwahati. international brand. strengthening the medical equipment base across our network. Short-Term Borrowings Trade Receivables The short-term borrowings have It is important to note that the Gross The trade receivables (net of provision for increased from `90 mn in 2016-17 to `376 Block figures include cash and non-cash doubtful receivables) went up from `1,569 mn in 2017-18. This increase was due to Government Grant of ~`1,500 mn as mn last year to `2,219 mn in 2017-18. meet the short-term capital commitments per Ind AS which was not a part of Gross This increase in the receivables is mainly of the Company. block as per the previous IGAAP. Also, as on account of increase in revenues of the per the Ind AS accounting, the overtaking Company over the last year and some the operations of Dharamshila Cancer part of the increase in receivables is also attributed to delay in payments related to certain government schemes. Inventories The inventory has increased from ` 524 mn last year to ` 588 mn. This nominal increase of ~12% in inventory compared to a major uptick of ~17% in revenues reflects the Company’s efficient supply chain management. Setting up of warehouses across the country to cater to needs of the facilities in their respective regions has turned out to be quite effective in managing the inventories at optimal level. 36 Narayana Hrudayalaya Limited Key Figures of Profit & Loss Statement (` in million) Consolidated Figures NH India NCHL Consolidated Consolidated Figures FY 16-17* FY 17-18 FY 17-18 FY 17-18 Operating Income 18,782 22,039 770 22,809 Cost of Material Consumed 4,359 5,407 158 5,565 Manpower Expenses 7,608 9,127 318 9,445 Other Expenses 4,526 5,492 185 5,677 Operating Rent 482 582 - 582 Repairs and Maintenance 754 950 37 987 Power and Fuel 499 629 22 651 Advertisement 375 469 41 510 Business Promotion 173 296 - 296 EBITDA 2,463 2,200 112 2,312 * Figures of HCCI were not consolidated in FY16-17. NH India P&L Review thus leading to higher consumables as a 18 due to outstanding employee stock Operating Income: percentage of operating revenues. options (ESOPs). The Company’ revenue from operations increased from 18,782 mn in 2016-17 to Increase in high end Procedures - LVAD Other Expenses 22,039 mn in 2017-18. This increase of & TAVI during the year leading to increase The other expenses (excluding 17.3% is due to: in consumables as a percentage of professional fees to doctors) of the operating revenues. Company at the India business level have Sustained performance of matured increased to ` 5,492 mn from ` 4,526 mn centres which increased from ` 482 mn Manpower Expenses (Employees in the previous fiscal. Some of the key to ` 581 mn with Health City, Bengaluru Benefits + Prof. Fees paid to heads and the movement of expenses growing at 16% along with a robust Doctors) across each is explained below: performance of less than 5 years’ centres The manpower expenses including (Excluding recently commissioned units) professional fees paid to doctors have Operating Rent which grew by ~24%. increased from ` 7,608 mn in 2016-17 The operating rent increased from `482 Commissioning of new hospitals in to ` 9,127 mn in 2017-18. This absolute mn in 2016-17 (2.6% of total operational Delhi NCR and Mumbai i.e. Dharamshila increase is majorly due to hiring of clinical revenue) to ` 582 mn (2.6% of total Multispeciality Hospital in Delhi and talent across our recently commissioned operational revenue) in 2017-18. The SRCC children’s Hospital in Mumbai facilities at Delhi NCR and Mumbai. absolute increase in operating rent is due which also added to group revenues. to rentals associated with commissioning Increase in headcount at the corporate of new centres such as a clinic at Cost of Material Consumed level and unit level also attributed to an increase in manpower cost. The cost of material consumed (purchase of medical consumables, drugs and In addition, the Company had a non-cash surgical equipment and changes in provisioning impact of ` 42 mn in 2017- inventories of medical consumables, drugs and surgical equipment) increased to ` 5,407 mn in 2017-18 from ` 4,359 mn last year. The major reasons for the same are: Introduction of GST during FY18 led to an increase in cost of medicines and consumables. Robust increase in revenues due to strong patients’ footfall across the network. Capping of prices of cardiac stents led to a decrease in stent realisation and Annual Report 2017-18 37 Company Overview Statutory Reports Financial Statements Langford Town, Bengaluru and setting up Advertisements and publicity cost Finance Cost of an international wing in Healthy City, increased from ` 375 mn in 2016- NH enjoys the best-in class commercials on Bengaluru. However, operating rent as a 17 to ` 469 mn in 2017-18 due to loans and borrowings from various banks. % of revenues remains unchanged due promotion exercise we undertook as Increase in Finance cost is attributed to the to strong increase in revenues over the we commissioned facilities in Mumbai, spike in net debt of the Company. last year. Delhi NCR and a clinic in Langford town in Bengaluru. The debt increased due to funding of Repair and Maintenance the Gurugram transaction where in the The repair and maintenance expenses Business Promotion increased company acquired a near complete ~200 have increased from ` 754 mn in 2016- from `173 mn in 2016-17 to `296 capacity-bedded hospital in Gurugram 17 to ` 950 mn in 2017-18. This increase mn in 2017-18 due to setting up of leading to higher finance cost. is because of cost incurred in regard a call centre to facilitate booking to MEP and IT infrastructure at newly the consultation appointments Finance cost as also increased due commissioned facilities at Delhi NCR at the network level, increase in to Ind AS adjustment as per which and Mumbai and clinic at Langford Town, international promotional expenses the Company has recorded a finance Bengaluru as well as maintenance of our to tap more international patients into lease liability in regard to the overtaking existing facilities. NH network. operations of the Dharamshala Cancer Care Hospital in Delhi. It is not actually an Power and Fuel EBITDA interest expense but a significant portion The overall power and fuel cost has The Company registered an EBITDA of rentals which we pay to our partner as increased from ` 499 mn in 2016-17 to of `2,200 mn in FY 2017-18 for its per our agreement. ` 629 mn in 2017-18. This is primarily India business. The dip in profitability due to increase in electricity consumption is majorly on account of operational/ A part of finance cost is also attributed because of commissioning of new facilities pre-commissioning losses associated to NH India having US$ 25 mn of debt in Mumbai, Delhi NCR and a new clinic in with our newly commissioned facilities. on its books in regard to the Cayman Langford, Bengaluru along with increased These facilities in Delhi NCR and Islands’ transaction we consummated consumption across the network due to Mumbai together contributed to losses during FY18. This debt is US dollar increase in occupied beds in FY18. worth ` 405 mn. Additionally, capping denominated and has come at very on cardiac stent prices impacted attractive commercials. Business Promotion and our revenues which led to directly Advertisements impacting the EBITDA significantly. These expenses were at ` 765 mn for Introduction of GST also increased our 2017-18. This cost continues to grow with cost leading to downward pressure on expansion of NH’s network. the profitability. 38 Narayana Hrudayalaya Limited Board’s Report Dear Members, Your Directors have immense pleasure in presenting their Eighteenth Annual Report on the business and operations of the Company and Audited Financial Statements for the financial year ended 31st March 2018. 1. Financial Summary/Highlights, Performance and State of Affairs of The company (` in mn, except per share data) Particulars Standalone Consolidated 2017-18 2016-17 2017-18 2016-17 Income Revenue from Operations 18,475.75 16,459.15 22,809.07 18,781.65 Other Income 186.38 181.46 189.00 174.82 Total Income 18,662.13 16,640.61 22,998.07 18,956.47 Total Expenditure* 16,719.17 14,335.29 20,686.42 16,493.09 Earnings Before Interest, Tax, Depreciation and Amortisation and Exceptional items 1,942.96 2,305.32 2,311.65 2,463.38 Less: Interest & Depreciation 977.24 800.14 1,467.05 1,017.24 Less: Exceptional items 11.58 31.91 (5.41) 13.40 Profit before tax 954.14 1,473.27 850.01 1,432.74 Less: Income Tax 369.92 522.18 289.64 523.66 Profit/(Loss) After Tax 584.22 951.09 560.37 909.08 Add: Share of Profit/ (Loss) in Associate(Net) - - (46.35) (79.34) Profit for the year 584.22 951.09 514.02 829.74 Add: Other Comprehensive Income (4.61) 3.80 34.79 0.35 Net Profit/(Loss) 579.61 954.89 548.81 830.09 Earnings Per Share (Basic) 2.88 4.70 2.53 4.10 Earnings Per Share (Diluted) 2.88 4.69 2.53 4.09 *Expenses before depreciation and amortisation, finance costs and exceptional items. 2. Performance Overview Consolidated Operations Standalone Operations During the year under review, the total income of the During the year under review, the total income of the Company increased from ` 18,956.47 mn in 2016-17 Company increased from ` 16,640.61 mn in 2016-17 to ` 22,998.07 mn in 2017-18. to ` 18,662.13 mn in 2017-18. Earnings before Interest, Tax, Depreciation and Earnings before Interest, Tax, Depreciation and Amortization and Exceptional items decreased from Amortization and Exceptional items decreased from ` 2,463.38 mn in 2016-17 to ` 2,311.65 mn in 2017-18. ` 2,305.32 mn in 2016-17 to ` 1,942.96 mn in 2017-18. Profit for the year decreased from ` 829.74 mn in Profit for the year decreased from ` 951.09 mn in 2016-17 to ` 514.02 mn in 2017-18. 2016-17 to ` 584.22 mn in 2017-18. Annual Report 2017-18 39 Company Overview Statutory Reports Financial Statements Your Company continues to emphasize on maintaining the • 2 Associate Companies highest standards of clinical excellence, patient care and None of the above Companies is a Material Subsidiary satisfaction. With regards to accountability and governance, within the meaning of Material Subsidiary as defined your Company continues to ensure an environment of under the SEBI (Listing Obligations & Disclosure transparency and responsibility while aiming for the highest Requirements) Regulations, 2015 except Narayana standards of corporate governance and trust. Cayman Holdings Limited. Pursuant to the provisions of Section 129 of the Companies Act, 2013, a 3. Transfer To Reserves Statement containing the salient features of the Dividend and transfer to reserves Financial Statements of the Company’s Subsidiaries The Company since its maiden public listing of shares in and Associates in Form AOC-1, that forms part of this 2016 had pursued its growth ambition during the last financial Report is attached as Annexure I. year by acquiring 130 bedded hospital in Gurugram which has since commenced operations. The Company had also Pursuant to Section 129 of the Companies Act, entered into asset light model agreement with Dharamshila 2013, the Consolidated Financial Statements of the Cancer Foundation and Research Centre in Delhi which has Company, prepared in accordance with the relevant been converted into a multispecialty hospital. These growth Accounting Standards specified under Section 133 of investments and further upgradation of existing facilities of the Companies Act, 2013 read with the Rules made the Company have been carried out to provide world class thereunder, forms part of this Annual Report. health service with an objective to further grow the business. Further, pursuant to provisions of Section 136 of the The Company continues to look at growth prospects through Companies Act, 2013, new investment opportunities. Considering that consolidation i. The Annual Report of the Company, containing is taking place in the Healthcare Industry in India, it presents therein its Standalone and Consolidated Financial us with more challenges in terms of growth and it is imperative Statements are available on the Company’s that the Company looks at available options for organic as website i.e., https://www.narayanahealth.org/ well as in-organic growth. Achieving a consistent sustainable stakeholder-relations. growth over the next few years and consolidating Company’s position competitively would be a key objective. ii. The audited Financial Statements of Subsidiary Companies are available on the website of the While the Company appreciates the desire of the investors to Company i.e., https://www.narayanahealth.org/ have dividends for a return on investment, the Management stakeholder-relations, post approval of Members is of the bonafide belief that it is appropriate to retain the of the Company. earnings to pursue the much needed growth ambitions which is also in the interest of all the Shareholders. Such The brief details of all the Subsidiary and Associate a strategy will not only hold the Company in good stead in Companies are as follows: times ahead but will also enhance Shareholders value in i) Narayana Hrudayalaya Surgical Hospital Private the medium to long term. Limited (NHSHPL) Hence, the Board has not recommended any dividend for NHSHPL is a wholly owned subsidiary of the the financial year under review. Company and is engaged in the business of operating and maintaining hospitals, clinics, health The Company has adopted a Dividend Declaration Policy centers, nursing homes and other related activities. and it is available on the Company’s website at https://www. This subsidiary has a multispecialty hospital in narayanahealth.org/stakeholder-relations/company-policies. Mysore, offering a wide range of services across specialties, which includes cardiology, cardiac During the year, ` 579.61 mn was transferred to Reserves. surgery, nephrology, urology, neurology, neuro- surgery, endocrinology, orthopaedics, internal 4. Subsidiary and Associate Companies medicines, obstetrics, gynaecology, paediatrics, Review of performance of Subsidiaries neonatology,gastroenterology and oncology to and Associate Companies name a few. The subsidiary also operates and As on 31st March 2018 the Company has: runs the Dharamshila Narayana Superspecialty Hospital in Delhi under a Service Agreement with • 9 Subsidiary Companies (excluding NewRise Dharamshila Cancer Foundation and Research Healthcare Private Limited and Narayana Hrudayalaya Centre. Other financial information is included in Hospitals Malaysia Sdn Bhd (Narayana Malaysia) and Form AOC-1. 40 Narayana Hrudayalaya Limited ii) Meridian Medical Research & Hospital Limited operations. Further, other financial information is (MMRHL) included in Form AOC-1. MMRHL is a subsidiary of the Company and is engaged in the business of operation of hospitals, vii) NewRise Healthcare Private Limited (NRHPL) clinics, health centers, nursing homes and other NRHPL was a wholly owned subsidiary of the related activities. This subsidiary has two hospitals in Company which was acquired from Panacea Biotech Howrah offering multi-specialty and super-specialty Limited during the year under review. NRHPL was healthcare services like, oncology, cardiology, cardiac subsequently merged with the Company vide th surgery, nephrology, urology, neurology, neuro Regional Director’s Order dated 4 October 2017. surgery, etc. Further, other financial information is included in Form AOC-1. viii) Narayana Hrudayalaya Hospitals Malaysia Sdn Bhd (Narayana Malaysia) iii) Narayana Vaishno Devi Specialty Hospitals Narayana Malaysia was a wholly owned subsidiary Private Limited (NVDSHPL) of the company and was authorized to engage in the NVDSHPL is a wholly owned subsidiary of the business of hospitals, nursing homes, medical and Company and is engaged in the business of other research centers, maternity homes and other providing healthcare services of superior quality with related activities.This subsidiary had commenced the latest advanced technology, clinics, health centers, process of Members’ Voluntary winding up in 2017 as diagnostic centers and other related activities. This per the extant provisions of the Malaysian Company subsidiary has a hospital at Kakryal near Katra in Law. The liquidation of the subsidiary has been th Jammu which caters to patients across more than completed and stands dissolved on 27 March 2018. 20 different specialties, with radiology, obstetrics & gynaecology, oncology, etc. Further, other financial ix) Narayana Cayman Holdings Ltd (NCHL) information is included in Form AOC-1. NCHL is a wholly owned subsidiary of the Company and has the power and authority to carry out any object iv) Narayana Hospitals Private Limited (NHPL) not prohibited by the Companies Law of the Cayman NHPL is a wholly owned subsidiary of the Company Islands. Further, other financial information is included and is authorized to engage in the business of in Form AOC-1. NCHL is a material subsidiary within operation of hospitals, clinics, health centers, nursing the meaning of material subsidiary as defined under homes and other related activities. Further, other SEBI (Listing obligations and Disclosure Requirement) financial information is included in Form AOC-1. This Regulations, 2015. subsidiary is yet to commence operations. x) Narayana Holdings Private Limited (Narayana v) Narayana Institute for Advanced Research Holdings) Private Limited (NIARPL) Narayana Holdings is a wholly owned subsidiary of NIARPL is a wholly owned subsidiary of the Company the Company and is a Company incorporated in the and is authorized to engage in the business of research Republic of Mauritius in April, 2016. Further, other and development work connected with faculty of financial information is included in Form AOC-1. medicines and operation of hospitals, clinics, health centers, nursing homes and other related activities. xi) Health City Cayman Islands Ltd (HCCI) This subsidiary is yet to commence operations. HCCI is a company incorporated in Cayman Islands Further, other financial information is included in and operates a hospital in Cayman Islands. Company Form AOC-1. held 28.6% equity shares in HCCI through its wholly owned subsidiary Narayana Cayman Holdings vi) Narayana Health Institutions Private Limited Limited (NCHL) and the balance 71.4% of the shares (NHIPL) of HCCI was held by Ascension Health Ventures LLC, NHIPL is a wholly owned subsidiary of the Company USA, (AHV) an affiliate of Ascension Health Alliance, and is authorized to engage in the business of USA (AHA). HCCI bought back 71.4% held by AHV running medical colleges and operation of hospitals, during the year under review. clinics, health centers, nursing homes and other Consequent to this buy back, HCCI, became a 100% related activities.This subsidiary is yet to commence step down subsidiary of Company . Annual Report 2017-18 41 Company Overview Statutory Reports Financial Statements Associate Companies iii) The Directors have taken proper and sufficient care i) Cura Technologies Inc (Cura) for the maintenance of adequate accounting records Cura is an Associate Company incorporated in the in accordance with the provisions of the Companies State of Delaware, USA, in which the Company holds Act, 2013 for safeguarding the assets of the Company 43.33% of common stock of the associate company and for preventing and detecting fraud and other through NCHL and the remaining shares are held by irregularities. Mr. Samir Mitra and others. This company is engaged iv) The Directors have prepared the annual accounts on in the business of developing software and technology a going concern basis. to transform delivery of patient care. Further, other financial information is included in Form AOC-1. v) The Directors have laid down internal financial controls to be followed by the Company and such internal financial ii) ISO Healthcare controls are adequate and were operating effectively. ISO Healthcare is an Associate Company incorporated in Mauritius in which the Company holds 20% of the vi) The Directors have devised proper systems to ensure equity shares through Narayana Holdings. Further, compliance with the provisions of all applicable laws other financial information is included in Form AOC-1. and that such systems were adequate and operating effectively. 5. Share Capital Based on the framework of internal financial controls and As on 31st March 2018, the Authorized Share Capital of the compliance systems established and maintained by the Company is ` 3,800 mn comprising 30,90,00,000 Equity Company, work performed by the internal, statutory and Shares of ` 10 each and 7,10,00,000 Preference Shares secretarial auditors and external consultants, including of ` 10 each. The Paid-up Share Capital is ` 2,043.61 audit of internal financial controls over financial reporting mn comprising of 20,43,60,804 Equity Shares of ` 10 by the statutory auditors, and the reviews performed each. The Authorized Share Capital of the Company was by management and the relevant Board Committees, increased from ` 3000 mn to ` 3,800 mn on consolidation including the Audit, Risk and Compliance Committee the of Authorised Share Capital of NewRise Healthcare Private Board is of the opinion that the Company’s internal financial Limited with the Authorised Share Capital of the Company controls were adequate and effective during 2017-18. consequent to Regional Director’s Order dated 4th October 2017 amalgamating NewRise Healthcare Private Limited 7. Board of Directors and Committees with the Company. Composition of Board of Directors and changes 6. Directors’ Responsibility Statement thereof In terms of Section 134 (5) of the Companies Act, 2013, the Your Company’s Board of Directors comprises Executive Directors would like to state that: Directors, Non-Executive Directors (One Woman Director) and Independent Directors. The Composition of the Board along i) In the preparation of the annual accounts, the with the changes, if any, thereof is detailed in the Corporate applicable Accounting Standards have been followed Governance Report which forms a part of this Report. along with proper explanation relating to material departures, if any. During the year under review, there has been no change in the Directors of the Company. Ms. Kiran Mazumdar Shaw ii) The Directors have selected such accounting policies Non-Executive Director who retired by rotation was re- and applied them consistently and made judgements appointed as a Director at the Seventeenth Annual General and estimates that were reasonable and prudent so as Meeting of the Company held on 3rd August 2017. Mr. Viren to give a true and fair view of the state of affairs of the Shetty, Whole-time Director is retiring by rotation at the Company at the end of the financial year and of the ensuing Annual General Meeting and being eligible has profit or loss of the Company for the year under review. offered himself for re-appointment. Pursuant to the provisions of Section 203 of the Companies Act, 2013, the Key Managerial Personnels (KMPs) of the Company are: S. No. Name of the KMPs Position held in the Company 1. Dr. Ashutosh Raghuvanshi Vice-Chairman, Group CEO & Managing Director 2. Mr. Venugopalan Kesavan Group Chief Financial Officer 3. Mr. Sridhar S Group Company Secretary, Legal & Compliance Officer 42 Narayana Hrudayalaya Limited The term of office of Dr. Devi Prasad Shetty as the Whole-time Meeting of the Company contains the above proposals for Director, Dr. Ashutosh Raghuvanshi as Managing Director the approval of the Members. and Mr. Viren Shetty as the Whole-time Director is expiring on 28th August 2018. Based on the recommendation of the Committees and their Constitution Nomination and Remuneration Committee, the Board has As required under the Companies Act, 2013 and SEBI re-appointed them at the Board meeting held on 29th May (Listing Obligations and Disclosure Requirements) 2018 subject to approval of the members in the ensuing Regulations, 2015, the Board has formed four Committees Annual General Meeting. viz. Stakeholders’ Relationship Committee, Audit, Risk and Compliance Committee, Nomination and Remuneration The term of office of Mr. Dinesh Krishna Swamy, Committee and Corporate Social Responsibility Committee. Mr. Muthuraman Balasubramanian, Mr. Arun Seth and Mr. B N Subramanya, Independent Directors is coming Keeping in view the requirements of the Companies to an end on 7th August 2018 while the term of office of Act, 2013 and SEBI (Listing Obligations and Disclosure Independent Director Mr. Manohar D Chatlani is coming Requirements) Regulations, 2015, the Board decides to an end on 10th September 2018.The Board of Directors the Terms of Reference of these Committees and the at their meeting held on 29th May 2018 has recommended assignment of Members to various Committees. The the re-appointment of all the Independent Directors for a recommendations, if any, of these Committees are second term of 5 years. The Notice of 18th Annual General submitted to the Board for approval. The Members of the Committees are S. Stakeholders’ Audit, Risk and Nomination and Remuneration Corporate Social No. Relationship Committee Compliance Committee Responsibility Committee Committee 1. Mr. Muthuraman Mr. B N Subramanya Mr. Arun Seth (upto 25th October 2017 and Mr. Dinesh Krishna Balasubramanian again from 26th March 2018) Swamy 2. Mr. B N Subramanya Mr. Dinesh Krishna Ms. Kiran Mazumdar Shaw Dr. Ashutosh Swamy Raghuvanshi 3. Dr. Ashutosh Raghuvanshi Mr. Muthuraman Mr. Dinesh Krishna Swamy Mr. B N Subramanya Balasubramanian 4. Mr. Viren Shetty - Mr. Muthuraman Balasubramanian (from - 25th October 2017 upto 26th March 2018) Number of meetings of the Board 9. Declaration by Independent Directors The meetings of the Board are scheduled at regular intervals of the Company to decide and discuss on the business performance, A Declaration of independence in compliance with Section policies, strategies and other matters of significance. The 149(6) of the Companies Act, 2013, has been taken on schedule of the meetings is circulated in advance to ensure record from all the Independent Directors of the Company. proper planning and effective participation in meetings. 10. Performance Evaluation of Directors In certain exigencies, decisions of the Board are also Pursuant to the provisions of the Companies Act, 2013 accorded through circulation. and Regulations 17 and 19 of the SEBI (Listing Obligations The Board during the financial year under review met seven and Disclosure Requirements) Regulations, 2015, evaluation of every Director’s performance was carried (07) times. Detailed information regarding the meetings of out by the Nomination and Remuneration Committee. The the Board and meetings of the Committees of the Board performance evaluation of Non-Independent Directors and is included in the Report on Corporate Governance which Board as a whole, Committees thereof and Chairman of forms a part of Board’s Report. the Company was carried out by the Independent Directors 8. Company’s Policy on Appointment and through a separate meeting of the Independent Directors Remuneration of Directors held on 26th March 2018. Evaluation of Independent Company’s policy on Directors’ appointment and Directors was carried out by the entire Board of Directors, remuneration and other matters provided in Section 178(3) excluding the Director being evaluated. of the Companies Act, 2013 is available on our website at The evaluation was carried out on the basis of response of https://www.narayanahealth.org/stakeholders-relations/ the Directors to a structured questionnaire covering various company-policies. aspects of Board performance such as Board composition Annual Report 2017-18 43 Company Overview Statutory Reports Financial Statements and expertise, Board oversight, strategy and direction, 13. Material Changes and Commitments, if Corporate Governance and Board administration and any, Affecting the Financial Position inputs shared by the Directors at the meeting. of the Company Occurred Between the end of the Financial Year to which 11. Auditors these Financial Statements Relate and A. Statutory Auditors the Date of the Report M/s. Deloitte Haskins and Sells LLP (Firm There are no material changes affecting the financial Registration Number 117366W/W-100018), Chartered position of the Company between the end of the financial Accountants, Bengaluru are the statutory auditors of year to which these financial statements relate and the date the company who were appointed at the 17th Annual of the Report. General Meeting of the Company held on 3rd August 2017 for a period of 5 years. 14. Deposits Your Company has not accepted any deposits within the Auditor’s Report meaning of Section 73 of the Companies Act, 2013 and the The Auditors’ have issued an unmodified Report for Companies (Acceptance of Deposits) Rules, 2014. the year ended 31st March 2018 and hence, do not call for any comments from the Management under 15. Particulars of Loans, Securities, Section 134 of the Companies Act, 2013. Guarantees and Investments The loans given, security provided, guarantees given and B. Cost Auditors investments made by the Company under Section 186 The Board has approved the appointment of of the Companies Act, 2013 are given in the notes to the M/s. PSV & Associates, Cost Accountants having Firm Financial Statements. Registration Number 000304, as the Cost Auditor of the Company for the financial year 2018-19 at a 16. Related Party Transactions remuneration of `3,00,000 (Rupees Three Lakh) only, The Company has taken necessary approvals as and when exclusive of reimbursement of tax and all out of pocket required as per the Companies Act, 2013 and SEBI (Listing expenses incurred, if any, in connection with the Obligations and Disclosure Requirements) Regulations, cost audit. 2015. The details of the transactions entered into with the Related Parties are stated in the notes to accounts and The Board of Directors of the Company proposes the Form AOC-2 as prescribed under the Companies Act, 2013 ratification of remuneration of M/s. PSV & Associates, is annexed herewith as Annexure II. Cost Accountants as the Cost Auditor of the Company, for financial year 2018-19 at the ensuing Annual 17. The Extract of Annual Return The extract of Annual Return in Form MGT-9 is annexed General Meeting. herewith as Annexure III. C. Secretarial Auditor 18. Corporate Social Responsibility The Company has appointed M/s. Ganapathi and Your Company is building a robust support structure to Mohan, (Firm Registration No. P2002KR57100), empower the less privileged sections of society. Through its Practicing Company Secretaries to undertake the community outreach programs, your Company is building Secretarial Audit of the Company for financial year the infrastructure necessary to bring about the changes to 2017-18. The Report of the secretarial audit is annexed ensure improved health and well-being for the community. herewith as Annexure IX. As a responsible corporate citizen, your Company undertook several social welfare initiatives. Annual Report on Corporate There is no qualification, reservations or adverse Social Responsibility is annexed herewith as Annexure IV. remarks made by M/s. Ganapathi and Mohan, Practicing Company Secretaries, Secretarial Auditor 19. Particulars of Employees of the Company in their Secretarial Audit Report. The statement containing particulars in terms of Section 197(12) of the Companies Act, 2013 read with Rule 5(1) 12. Internal Audit Systems of the Companies (Appointment and Remuneration of Your Company has continued its engagement with M/s. Ernst Managerial Personnel) Rules, 2014 forms part of this & Young LLP, Chartered Accountants, to conduct internal Annual Report and is appended herewith as Annexure V to audit across the organization. We have also strengthened the Boards’ report. The statement containing particulars in the in-house internal audit team to supplement and support terms of Section 197(12) of the Companies Act, 2013 read the efforts of M/s. Ernst & Young LLP. with Rule 5(2) and 5(3) of the Companies (Appointment 44 Narayana Hrudayalaya Limited and Remuneration of Managerial Personnel) Rules, 2014 to create an environment of accountability and trust. forms part of this Annual Report. These responsibilities continue to be the focus of its Considering the first proviso to Section 136(1) of the attention through the tumultuous ride along the path of Companies Act, 2013, the Annual Report, excluding the expansion, ensuring the highest standards of ethics and aforesaid information, is being sent to the Members of the integrity in all its business dealings while avoiding potential Company and others entitled thereto. The said information conflicts of interest. The result of this is a corporate structure is available for inspection at the Registered Office of the which serves its ever expanding business needs while Company during business hours on working days of the maintaining transparency and adherence to the above Company up to the date of the ensuing Annual General stated beliefs. Meeting. Any shareholder interested in obtaining a copy A report on Corporate Governance and a certificate thereof, may write to the Secretarial Team of the Company from M/s. Ganapathi and Mohan, (Firm Registration No. in this regard. P2002KR57100), Bengaluru, affirming the compliance with the various provisions of the Corporate Governance as 20. eMPLOyee Stock Option Plan stipulated under Regulation 27 of SEBI (Listing Obligations The Company has adopted the Narayana Hrudayalaya and Disclosure Requirements) Regulations, 2015 forms Employee Stock Option Plan (NH ESOP), 2015 pursuant part of the Annual Report and is annexed to Board’s Report to the approval of the Board on 7th September 2015 and as Annexure VII and Annexure VII A, respectively. the approval of Shareholders on 12th September 2015. The Plan is administered by the Nomination and Remuneration 25. Business Responsibility Report Committee through Narayana Health Employees Benefit The Board of Directors of the Company has adopted Trust. Pursuant to Rule 12(9) of the Companies (Share the Business Responsibility Policy of the Company at its Capital and Debentures) Rules, 2014 read with Regulation meeting held on 29th May 2017 which is available on our 14 of SEBI (Share Based Employee Benefits) Regulations, website i.e., https://www.narayanahealth.org/stakeholder- 2014 the details of the Employee Stock Option Plan are relations/company-policies. annexed as Annexure X to this report: Details of the various initiatives taken by the Company 21. Conservation of Energy, Technology towards the well being of consumers, employees and the Absorption and Foreign Exchange equitable development of the society at large, sustainability Earnings and Outgo of the environment, etc. are given separately in the Business The information on conservation of energy, technology Responsibility Report attached in Annexure VIII. absorption and foreign exchange earnings and outgo stipulated under Section 134(3)(m) of the Companies Act, 26. Vigil Mechanism / Whistle Blower Policy 2013 read with Rule 8 of the Companies (Accounts) Rules, The Company has developed a Whistle Blower Policy with a 2014 is detailed in Annexure VI. view to provide a mechanism for employees and Directors of the Company to voice concerns and grievances in a 22. Significant or Material orders Passed responsible manner. by the Regulators/ Courts There are no significant and material orders passed by Further, details of the same are provided in Corporate the regulators or courts or tribunals impacting the going Governance Report attached to this Report. concern status and Company’s operation in future. 27. Disclosures as per the Sexual 23. Management Discussion and Analysis Harassment of Women at Workplace Report (Prevention, Prohibition and Redressal) A detailed analysis of the Company’s operational and Act, 2013 financial performance as well as the initiatives taken by The Company has in place a Policy on prevention of sexual the Company in its key functional areas are separately harassment in workplace framed under Sexual Harassment discussed in this Annual Report. of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013. Internal Complaints Committee (ICC) 24. Corporate Governance has been set up to redress complaints received regarding Your Company places utmost importance on its fiduciary sexual harassment. All employees (permanent, contractual, role as a guardian of stakeholders’ interest and strives to temporary, trainees) are covered under this policy. Below achieve a mutually aligned objective of value and wealth is the report on the same containing details of number of creation for all interested parties. The Board and the cases filed, their disposal, nature of action taken, number Management humbly acknowledges this role and continues of cases pending and number of workshop/awareness to propagate this belief through all layers of the organization sessions conducted. Annual Report 2017-18 45 Company Overview Statutory Reports Financial Statements No. of No. of Nature of Action Taken No. of No. of workshops No. of cases cases cases conducted participants reported disposed pending (Induction & Refresher) 3 3 Out of 3 cases, in 1 case the services of the Nil 344 7054 respondent was terminated. One case was not proved to be sexual harassment and subsequently action has been initiated as per the disciplinary policy. One case has been settled through conciliation. 28. RISK MANAGEMENT POLICY 34 read with Part D of Schedule V of the SEBI (Listing The Board of Directors of the Company has formed Audit, Obligations and Disclosure Requirements) Regulations, Risk and Compliance Committee with well-defined roles 2015. A declaration signed by Dr. Ashutosh Raghuvanshi, and responsibilities of the Committee which includes the Vice-chairman, Group CEO & Managing Director of reviewing and recommending of risk management plan and the Company affirming the compliance with the Code of the risk management report for approval of the Board. The Conduct of the Company for the financial year 2017-18 has Audit, Risk and Compliance Committee evaluates internal been annexed as part of this Report. financial controls and risk management systems. The Risk Management Policy of the Company is available on our 31. ACKNOWLEDGEMENT website i.e., https://www.narayanahealth.org/stakeholder- Your Directors are grateful for all the help, guidance and relations/company-policies. support extended to them by patients, bankers, suppliers and investors. Your Directors also wish to thank the medical 29. INSIDER TRADING POLICY professionals and employees at each level for their hard The Board of Directors of the Company has revised the work, commitment and performance during the year. insider trading policy at its meeting held on 6th November 2017. The Policy is available on our website i.e., https:// For and on behalf of the Board www.narayanahealth.org/stakeholder-relations/company- policies. Dr. Ashutosh Raghuvanshi Mr. Viren Shetty Vice Chairman, Group CEO Whole-time Director 30. DECLARATION ON CODE OF CONDUCT & Managing Director, DIN: 02144586 The Company has adopted the Code of Conduct for all DIN: 02775637 its Senior Management Personnel and Directors and the Place: Bangalore same is affirmed by all the Board Members and Senior Date: 29th May 2018 Management Personnel as required under Regulation DECLARATION ON CODE OF CONDUCT To , The Members of Narayana Hrudayalaya Limited I, Dr. Ashutosh Raghuvanshi, Vice-chairman, Group CEO & Managing Director of the Company declare that all the Members of the Board of Directors and Senior Management Personnel have affirmed compliance with the Code of Conduct for the financial year ended 31st March 2018. For Narayana Hrudayalaya Limited Dr. Ashutosh Raghuvanshi Vice-chairman, Group CEO & Managing Director Date: 29th May 2018 DIN: 02775637 46 Narayana Hrudayalaya Limited Annexure I - - ` ) INR 4,395 85,988 100.00% 4,204,838 8 4,204,838 50,407,500 41,621,812 37,492,100 (8,871,676) Limited Narayana Holdings Private 31 March 2018 April 2017, was st - - INR 99.12% 7 23,694,000 290,213,000 121,751,000 859,587,499 103,821,000 (80,127,000) Limited Medical Meridian 1,271,984,000 Research 1,398,610,000 & Hospitals 31 March 2018 - - INR 31,074 100.00% 6 3,332,103 3,332,103 50,286,958 773,114,919 Limited Cayman Holdings 2,815,159,206 2,527,491,581 5,342,681,863 Narayana 31 March 2018 - - - INR March, 2018. th 100.00% (411,135) (411,135) 5 98,281,171 97,427,951 10,000,000 683,277,483 (10,853,222) Specialty Hospitals Narayana Vaishno Devi Vaishno Private Limited 31 March 2018 (Information in respect of each subsidiary to be presented with amounts - - - INR 100.00% 4 October 2017. 191,345,000 (21,293,000) th Limited Surgical (211,158,000) (211,158,000) 1,802,535,000 1,972,587,000 1,532,901,616 Narayana Hrudayalaya Hospital Private 31 March 2018 - - - INR 100.00% F ORM AOC-1 3 30,401,158 18,851,944 18,851,944 118,224,475 532,614,420 “A”: Su bsidiari e s art “A”: 1,466,071,815 2,136,910,716 Hospitals Narayana P Private Limited 31 March 2018 - - - - INR 633,130 100.00% (229,160) (229,160) 1,019,200 2 11,040,400 (11,426,473) Institutions Private Limited Narayana Health 31 March 2018 - - - - INR 222,400 100.00% (221,366) (221,366) 1 10,383,870 46,408,763 57,015,033 Research Narayana Advanced Institute for Private Limited 31 March 2018 (Pursuant to first proviso sub-section (3) of Section 129 read with Rule 5 Companies (Accounts) Rules, 2014) Statement containing salient features of the financial statement subsidiaries/associate companies/joint ventures Narayana Hospitals Private Limited Narayana Institute for Advanced Research Private Limited Narayana Health Institutions Private Limited Narayana Hrudayalaya Hospitals Malaysia Sdn, Bhd was liquidated and stands dissolved on 27 NewRise Healthcare Private Limited was wholly owned subsidiary of the company was acquired from Panacea Biotech Limited on 21 NewRise Healthcare Private Limited was wholly owned subsidiary of the company was acquired from Panacea The figures reported for Narayana Cayman Holdings Limited are consolidated figures including its subsidiary Cayman Islands company Health City Limited, Cayman. Names of subsidiaries which are yet to commence operations. i) ii) iii) Names of subsidiaries which have been liquidated or sold during the year i) ii) subsequently merged with the company vide Regional Directors order dated 4 S. No. Reporting period for the subsidiary concerned, if different from the holding company’s reporting period Name of the subsidiary Reporting currency and Exchange rate as on the last date of the relevant Financial year in the case of foreign subsidiaries. Share capital Reserves & surplus assets Total Total Liabilities Total Investments Turnover Profit before taxation Provision for taxation Profit after taxation Proposed Dividend % of shareholding 3. Notes:- 1. 2. Annual Report 2017-18 47 Company Overview Statutory Reports Financial Statements U SD 1,287 77,091 20.02% 662,000 308,006 1,271,552 Ind AS 28 (Associate) 31 March 2018 ISO Healthcare Consolidated as per U SD Mr. Viren Shetty Viren Mr. Whole-time Director DIN: 02144586 DIN: 39,000 43.33% (727,074) (950,919) (1,487,516) 390,000,000 per Ind AS 28 31 March 2018 Inc. (Associate) Consolidated as Cura Technologies Cura Technologies DIN: 02775657 DIN: & Managing Director Vice-Chairman, Group CEO Dr. Ashutosh Raghuvanshi Dr. art “B”: Su bsidiari e s /J oint Ve nt u r P ISO Healthcare Cura Technologies Inc Cura Technologies May 2018 th Considered in Consolidation Not Considered in Consolidation Names of associates or joint ventures which are yet to commence operations. i) ii) Names of associates or joint ventures which have been liquidated, impaired or sold during the year. - Nil Names of associates or joint ventures which have been liquidated, impaired or sold during the year. Shares of Associate/Joint Ventures held by the company on year end No. Shares of Associate/Joint Ventures Amount of Investment in Associates Extent of Holding % Description of how there is significant influence Reason why the associate/ joint venture is not consolidated Net worth attributable to Shareholding as per latest Balance Sheet Profit / (Loss) for the year i. i. Notes :- 1. Latest Balance Sheet Date Name of Associates/Joint Ventures Name of Associates/Joint Ventures 2. Date: 29 Place: Bengaluru 48 Narayana Hrudayalaya Limited Annexure II NIL NIL NIL NIL NIL NIL NIL NIL if any paid as Amount advances, nd May, May, th August, August, nd nd March 2017 March 2017 March 2017 March 2017 March 2017 March 2017 March rd rd rd rd rd rd rd 23 Date(s) of approval by the Board 23 23 23 and 2 and 2 23 2017, 29 2017 and 2 August 2017 2017 23 2017 23 th basis : NIL th basis : ` 2,09,821 Purchase of Medicines and Surgical of transactions Consumables. Value during the year was Salient terms of the contracts or arrangements or transactions including the value, if any Supply of disposable drapes. Value of Supply of disposable drapes. Value transactions during the year was of Purchase of Medicine. Value transactions during the year was Sale/Purchase of Biomedical Equipments, medicines and consumables, software license. Value of transactions during the year was of Hospital Lease rent. Value transactions during the year was ` 9,43,09,632 ` 9,56,48,225 ` 14,54,94,669 ` 96,52,500 For providing manpower services and For of transactions during services. Value the year was ` 29,78,769 Nursing Hostel Rent. Value of Nursing Hostel Rent. Value transactions during the year was For providing cloud managed services. For of transactions during the year Value was USD 1,20,000 ` 57,45,656. Ongoing Duration of the contracts / arrangements/ transactions Ongoing Ongoing Ongoing Ongoing Ongoing Ongoing Ongoing ORM NO. AOC – 2 F ORM NO. Purchase of goods or materials Nature of contract/ arrangements/ transactions Purchase of goods or materials Purchase of goods or materials Sale / Purchase of Property & purchase of goods or materials. Leasing of property – payment of rent Manpower Services Leasing of property – payment of rent Rendering of service of the Companies (Accounts) Rules, 2014] [Pursuant to clause (h) of sub-section (3) Section 134 the Companies Act, 2013 and Rule 8(2) Hrudayalaya Pharmacy, Partnership firm owned by Partnership Hrudayalaya Pharmacy, Devi Prasad Shetty), Mrs. Shakuntala Shetty (Wife of Dr. Shetty Varun Viren Shetty (Whole-time Director) Dr. Mr. Anesh Shetty Devi Prasad Shetty) and Dr. (Son of Dr. Devi Prasad Shetty) (Son of Dr. Name(s) of the related party and nature relationship Amaryllis Healthcare Private Limited Viren Shetty (Whole-time Director) is a Director & Mr. Member in Amaryllis Healthcare Private Limited. Biocon Limited, Ms. Kiran Mazumdar Shaw (Non- Executive Director) is the Chairman and Managing Director of Biocon Limited. Health City Cayman Islands, subsidiary company in Devi Cayman Islands effective from 2 January 2018. Dr. Ashutosh Raghuvanshi Prasad Shetty (Chairman), Dr. Viren Shetty (Whole-time (Managing Director) and Mr. Director) are Directors of Health City Cayman Islands Ltd. Narayana Hospitals Private Limited, Wholly Owned Devi Prasad Shetty (Chairman) is the Dr. Subsidiary. Managing Director and a Nominee Shareholder in this Company. Charmakki Infrastructures, Partnership firm owned by Charmakki Infrastructures, Partnership Devi Prasad Shetty), Mrs. Shakuntala Shetty (Wife of Dr. Shetty Varun Viren Shetty (Whole-time Director),Dr. Mr. Anesh Shetty Devi Prasad Shetty) and Dr. (Son of Dr. Devi Prasad Shetty) (Son of Dr. arm ’ s l e n g o f contracts or arran ge m e nts transactions at De tails arm ’ s l e n g o f contracts or arran ge m e nts transactions not at De tails orm for disclosure of particulars of contracts/arrangements entered into by the Company with related parties referred to in sub- to referred parties Company with related into by the entered of contracts/arrangements of particulars disclosure for orm 2. 3. 4. 6. 5. 1. 2. F section (1) of Section 188 of the Companies Act, 2013 including certain arm’s length transactions under the third proviso thereto. 1. S. No. Annual Report 2017-18 49 Company Overview Statutory Reports Financial Statements NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL if any paid as Amount advances, August August August, August nd nd nd nd March 2017 March 2017 March 2017 March 2017 March 2017 March 2017 March 2017 March 2017 rd rd rd rd rd rd rd rd November November th th 23 Date(s) of approval by the Board 23 and 2 23 23 and 2 23 and 2 and 2 2017 6 2017 23 2017 6 2017 23 2017 23 2017 ` 70,03,929 Hospital Lease rent. Value of Hospital Lease rent. Value transactions during the year was ` 45,04,500 (including tax). Salient terms of the contracts or arrangements or transactions including the value, if any Servicing of Bio- Medical Equipments. of transactions during the year Value was ` 24,49,08,628 ` 42,56,070. Sale of Medicine and fixed assets. of transactions during the year Value was ` 3,45,899 Availing of Diagnostic Services. Value of Diagnostic Services. Value Availing of transactions during the year was of professional fees for Payment providing consultancy services. Value of transactions during the year was ` 8,71,294 Payment towards professional fees and Payment of transactions during the others. Value year was ` 2,06,276 towards use of Bone Payment of marrow transplant units. Value transactions during the year was ` 2,93,00,740 (including tax). Payment towards professional fees and Payment of transactions during the others. Value year was ` 2,11,819 providing manpower services. For of transactions during the year Value was ` 8,83,354 Payment towards ITS service Payment of transactions reimbursement. Value during the year was Ongoing Duration of the contracts / arrangements/ transactions Ongoing Ongoing Ongoing Ongoing Ongoing Ongoing Ongoing Ongoing Ongoing Leasing of property – payment of rent Nature of contract/ arrangements/ transactions Availing or Availing rendering of services Purchase of goods or materials and fixed assets Availing Services Availing Appointment to office or place of profit. Reimbursement of expenses Leasing Arrangement Reimbursement of expenses Rendering of service IT service March 2017. th Narayana Hrudayalaya Surgical Hospital Private Devi Prasad Dr. Limited, Wholly Owned Subsidiary. Ashutosh Raghuvanshi Shetty (Chairman) and Dr. (Managing Director) are Directors and Nominee Shareholders in Narayana Hrudayalaya Surgical Hospital Private Limited. Name(s) of the related party and nature relationship TriMedx India Private Limited, The Company owns 10% TriMedx Ashutosh Dr. of the equity share capital that Company. Raghuvanshi (Managing Director) was a director in India Private Limited upto 27 TriMedx Meridian Medical Research & Hospital Limited, Subsidiary in which the Company is holding 99.12% of the shares. Narayana Institute for Advanced Research Private Devi Prasad Dr. Limited, Wholly Owned Subsidiary. Viren Shetty (Whole-time Shetty (Chairman) and Mr. Director) are Directors in the Company (MSMF), Section Mazumdar Shaw Medical Foundation 8 Company formed under the Companies Act, 2013. Devi Prasad Shetty (Chairman) and Ms. Kiran Dr. Mazumdar Shaw (Non- Executive Director) are the Directors in Mazumdar Shaw Medical Foundation. Narayana Health Institutions Private Limited, Wholly Devi Prasad Shetty (Chairman) Dr. Owned Subsidiary. Ashutosh Raghuvanshi (Managing Director) are and Dr. Directors in the Company Devi Specialty Hospitals Pvt. Ltd, Narayana Vaishno Devi Dr. Wholly Owned Subsidiary of the Company. Ashutosh Raghuvanshi Prasad Shetty (Chairman), Dr. Viren Shetty (Whole-time (Managing Director), Mr. Director), Ms. Kiran Mazumdar Shaw (Non-Executive Devi Director) are Directors in Narayana Vaishno Devi Specialty Hospitals Private Limited. Also, Dr. Viren Ashutosh Raghuvanshi and Mr. Dr. Prasad Shetty, Shetty are Nominee Shareholders in this Company Devi Prasad relative (son) of Dr. Shetty, Varun Dr. Shetty. 7. 11. 12. 9. 10. 8. 13. S. No. 50 Narayana Hrudayalaya Limited NIL NIL NIL if any paid as Amount advances, DIN: 02144586 DIN: Mr. Viren Shetty Viren Mr. Whole-time Director May May th th March 2017 March 2017 March 2017 rd rd rd 23 Date(s) of approval by the Board and 29 23 and 29 2017 23 2017 ` 10,50,000 DIN: 02775637 DIN: Payment of remuneration for Payment appointment as Executive Assistant to of transactions during the Value CEO. year was ` 25,42,668 Salient terms of the contracts or arrangements or transactions including the value, if any Payment of professional fees for Payment providing consultancy services. Value of transactions during the year was ` 48,00,000 Payment of professional fees - Junior Payment of transactions Consultant. Value during the year was Dr. Ashutosh Raghuvanshi Dr. On Going Duration of the contracts / arrangements/ transactions Ongoing On Going Vice-chairman, Group CEO & Managing Director Appointment to office or place of profit. Nature of contract/ arrangements/ transactions Appointment to office or place of profit. Appointment to office or place of profit. May 2018 th Dr. Anesh Shetty, relative (son) of Dr. Devi Prasad relative (son) of Dr. Anesh Shetty, Dr. Shetty. Name(s) of the related party and nature relationship Dr. Varun Shetty, relative (son) of Dr. Devi Prasad relative (son) of Dr. Shetty, Varun Dr. Shetty. Dr. Vivek Shetty, relative of Dr. Devi Prasad Shetty. relative of Dr. Vivek Shetty, Dr. 14. 16. 15. Date: 29 Place: Bengaluru S. No. Annual Report 2017-18 51 Company Overview Statutory Reports Financial Statements Annexure III FORM NO. MGT 9 EXTRACT OF ANNUAL RETURN As on Financial Year ended on 31st March 2018 Pursuant to Section 92 (3) of the Companies Act, 2013 and Rule 12(1) of the Companies (Management & Administration) Rules, 2014. I. Registration & Other Details 1 Corporate Identity Number (CIN) L85110KA2000PLC027497 2 Registration Date 19th July 2000 3 Name of the Company Narayana Hrudayalaya Limited 4 Category/Sub-category of the Company Public Limited Company/ Limited by shares 5 Address of the Registered office & contact details No.258/A, Bommasandra Industrial Area, Anekal Taluk, Bangalore-560099 +918071222129 6 Whether listed company Yes 7 Name, Address & contact details of the Registrar & Karvy Computershare Private Limited, Karvy Selenium Tower B, Transfer Agent, if any. Plot 31 – 32, Gachibowli Financial District, Nanakramguda, Hyderabad, Telangana-500032 +914067161500 II. Principal Business Activities of the Company (All the business activities contributing 10 % or more of the total turnover of the company shall be stated) S. Name and Description of main products / services NIC Code of the Product/ % to total turnover No. service of the Company 1 Running hospitals, Diagnostic Centres, 8610 99.06% Clinical Centers or Test Laboratories. III. Particulars of Holding, Subsidiary and Associate Companies S Name and address of the Company CIN/GLN Holding/ Subsidiary/ % of shares Applicable No. Associate held Section 1 Narayana Hospitals Private Limited, U85110KA2004PTC033913 Subsidiary 100 2(87) No. 258/A, Bommasandra Industrial Area, Hosur Road, Bangalore -560099 2 Narayana Institute for Advanced Research U85121KA2006PTC040989 Subsidiary 100 2(87) Private Limited, No. 258/A, Bommasandra Industrial Area, Anekal Taluk, Bangalore -560099 3 Narayana Health Institutions Private Limited, U85110KA2008PTC046981 Subsidiary 100 2(87) No. 258/A, Bommasandra Industrial Area, Anekal Taluk , Bangalore -560099 4 Narayana Hrudayalaya Surgical Hospital Private U85100KA2010PTC055453 Subsidiary 100 2(87) Limited, No. 258/A, Bommasandra Industrial Area, Anekal Taluk , Bangalore -560099 5 Narayana Vaishno Devi Specialty Hospitals U85110KA2014PTC076218 Subsidiary 100 2(87) Private Limited, No. 258/A, Bommasandra Industrial Area, Anekal Taluk, Bangalore -560099 6 Meridian Medical Research & Hospitals U85110WB1995PLC071440 Subsidiary 99.12 2(87) Limited, West Bank Hospitals, Andul Road, Howrah-711109 7 Narayana Cayman Holding Limited, OG-240427 Subsidiary 100 2(87) 89, Nexus Way, Camana Bay, Grand Cayman K1-9007, Cayman Islands 52 Narayana Hrudayalaya Limited S Name and address of the Company CIN/GLN Holding/ Subsidiary/ % of shares Applicable No. Associate held Section 8 Narayana Holdings Private Limited, 137695-C1/GBL Subsidiary 100 2(87) Les Cascades Building, Edith Cavell Street, Port Louis, Mauritius 9 *Narayana Hrudayalaya Hospitals Malaysia 961782-T Subsidiary 100 2(87) Sdn. Bhd, Level 7, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara, Damansara Heights, 50490 Kuala Lumpur, Wilayah Persekutuan 10 **NewRise Healthcare Private Limited, U85110DL2002PTC114987 Subsidiary 100 2(87) B-1 Extn./ A-27, Mohan Co-op. Indl. Estate, Mathura Road, New-Delhi Delhi DL 110 044 11 ***ISO Healthcare, Les Cascades Building, 136656-C2/GBL Associate 20 2(6) Edith Cavell Street, Port Louis, Mauritius 12 ****Cura Technologies Inc., 1013 Centre Road 5618975 Associate 43.33 2(6) Suite, 403B Street, Wilmington, New Castel, 19805 13 *****Health City Cayman Islands Limited, OG-240426 Step Down 100 2(87) 89, Nexus Way, Camana Bay, Grand Cayman Subsidiary K1-9007, Cayman Islands * Narayana Hrudayalaya Hospitals Malaysia Sdn. Bhd. Liquidated on 27th March, 2018 ** NewRise Healthcare Private Limited was merged with Narayana Hrudayalaya Limited vide Regional Director’s Order dated 4th October 2017 *** Narayana Hrudayalaya Limited holds 20% in this company via its wholly owned subsidiary Narayana Holdings Private Limited.(Mauritius) **** Narayana Hrudayalaya Limited holds 43.33% in this company via its wholly owned subsidiary Narayana Cayman Holdings Limited. ***** Narayana Hrudayalaya Limited holds 100% in this company via its wholly owned subsidiary Narayana Cayman Holdings Limited. IV. Share Holding Pattern (Equity share capital breakup as percentage of total equity) (i) Category-wise share Holding Cate- Category of No. of shares held at the beginning of the year No. of shares held at the end of the year % gory Shareholder [As on 1st April 2017] [As on 31st March 2018] Change Code Demat Physical Total % of Total Demat Physical Total % of Total during Shares Shares the year (l) (ll) (lll) (lV) (V) (VI) (VII) (VIII) (IX) (X) (XI) (A) Promoter and Promoter Group (1) Indian (a) Individual/ HUF 12,67,83,666 0 12,67,83,666 62.04 12,67,83,666 0 12,67,83,666 62.04 0.00 (b) Central Government/ 0 0 0 0.00 0 0 0 0.00 0.00 State Government(s) (c) Bodies Corporate 37,02,064 0 37,02,064 1.81 37,02,064 0 37,02,064 1.81 0.00 (d) Financial Institutions/ 0 0 0 0.00 0 0 0 0.00 0.00 Banks (e) Others 0 0 0 0.00 0 0 0 0.00 0.00 Sub Total (A) (1) 13,04,85,730 0 13,04,85,730 63.85 13,04,85,730 0 13,04,85,730 63.85 0.00 (2) Foreign (a) Individuals (NRIs/ 0 0 0 0.00 0 0 0 0.00 0 Foreign Individuals) (b) Bodies Coporate 0 0 0 0.00 0 0 0 0.00 0 (c) Institutions 0 0 0 0.00 0 0 0 0.00 0 (d) Qualified Foreign 0 0 0 0.00 0 0 0 0.00 0 Investor (e) Others 0 0 0 0.00 0 0 0 0.00 0 Sub Total (A) (2) 0 0 0 0.00 0 0 0 0.00 0 Total A=A(1)+A(2) 13,04,85,730 0 13,04,85,730 63.85 13,04,85,730 0 13,04,85,730 63.85 0.00 Annual Report 2017-18 53 Company Overview Statutory Reports Financial Statements Cate- Category of No. of shares held at the beginning of the year No. of shares held at the end of the year % gory Shareholder [As on 1st April 2017] [As on 31st March 2018] Change Code Demat Physical Total % of Total Demat Physical Total % of Total during Shares Shares the year (l) (ll) (lll) (lV) (V) (VI) (VII) (VIII) (IX) (X) (XI) (B) Public Shareholding (1) Institutions (a) Mutual Funds/UTI 1,29,39,781 0 1,29,39,781 6.33 87,95,349 0 87,95,349 4.30 -2.03 (b) Financial Institutions/ 8,266 0 8,266 0.00 2,39,856 0 2,39,856 0.12 0.12 Banks (c) Central Government/ 0 0 0 0.00 0 0 0 0.00 0.00 State Government(s) (d) Venture Capital Funds 0 0 0 0.00 0 0 0 0.00 0.00 (e) Insurance Companies 0 0 0 0.00 0 0 0 0.00 0.00 (f) Foreign Institutional 1,22,31,673 0 1,22,31,673 5.99 1,95,29,234 0 1,95,29,234 9.56 3.57 Investors (g) Foreign Venture Capital 1,15,61,932 43,60,804 1,59,22,736 7.79 1,06,21,978 0 1,06,21,978 5.20 -2.59 Funds (h) Qualified Foreign 0 0 0 0.00 0 0 0 0.00 0.00 Investor (i) Others 1,97,47,762 0 1,97,47,762 9.66 1,17,65,046 0 1,17,65,046 5.76 -3.91 Sub-Total (B)(1) 5,64,89,414 43,60,804 6,08,50,218 29.78 5,09,51,463 0 5,09,51,463 24.93 -4.84 (2) Non-Institutions (a) Bodies Corporate 5,72,739 0 5,72,739 0.28 77,90,583 0 77,90,583 3.81 3.53 (b) Individuals i) Individual 30,52,813 1 30,52,814 1.49 49,52,961 1 49,52,962 2.42 0.93 shareholders holding nominal share capital upto ` 1 lakh ii) Individual 71,67,132 0 71,67,132 3.51 76,42,347 0 76,42,347 3.74 0.23 shareholders holding nominal share capital in excess of ` 1 lakh (c) Others Clearing Members 31,270 0 31,270 0.02 53,421 0 53,421 0.03 0.01 NBFC 5,469 0 5,469 0.00 5,969 0 5,969 0.00 0.00 Non Resident Indians 1,63,699 0 1,63,699 0.08 2,93,303 0 2,93,303 0.14 0.06 NRI Non-Repatriation 24,180 0 24,180 0.01 2,31,493 0 2,31,493 0.11 0.10 Trusts 20,07,553 0 20,07,553 0.98 19,53,533 0 19,53,533 0.96 -0.03 (d) Qualified Foreign 0 0 0 0.00 0 0 0 0.00 0.00 Investor Sub-total (B)(2) 1,30,24,855 1 1,30,24,856 6.37 2,29,23,610 1 2,29,23,611 11.22 4.84 Total (B)=B(1)+B(2) 6,95,14,269 43,60,805 7,38,75,074 36.15 7,38,75,073 1 7,38,75,074 36.15 0.00 19,99,99,999 43,60,805 20,43,60,804 100.00 20,43,60,803 1 20,43,60,804 100.00 0.00 (C) Shares held by custodians, against which Depository Receipts have been issued (1) Promoter and Promoter 0 0 0 0.00 0 0 0 0.00 0.00 Group (2) Public 0 0 0 0.00 0 0 0 0.00 0.00 Sub-Total (C ) 0 0 0 0.00 0 0 0 0.00 0.00 Grand Total (A+B+C) 19,99,99,999 43,60,805 20,43,60,804 100.00 20,43,60,803 1 20,43,60,804 100.00 0.00 54 Narayana Hrudayalaya Limited (ii) Shareholding of Promoter S Promoters’ Name Shareholding at the beginning of the year Shareholding at the end of the year % change in No. No. of % of total % of shares No. of % of total % of shares shareholding shares shares Pledged/ shares shares Pledged / during the of the encumbered of the encumbered year Company to total shares Company to total shares 1 Dr. Devi Prasad Shetty 6,47,00,571 31.66 0.00 6,47,00,571 31.66 0.00 0.00 2 Mrs. Shakuntala Shetty 6,20,83,095 30.38 0.00 6,20,83,095 30.38 0.00 0.00 3 Narayana Health 37,02,064 1.81 0.00 37,02,064 1.81 0.00 0.00 Academy Private Limited (iii) Change in Promoters’ shareholding (please specify, if there is no change) - No change S Particulars Date Reason Shareholding at the Cumulative shareholding No. beginning of the year during the year No. of % of total No. of % of total shares shares shares shares 1 At the beginning of the year 13,04,85,730 63.85 13,04,85,730 63.85 Changes during the year 0 0 0 0 At the end of the year 13,04,85,730 63.85 13,04,85,730 63.85 (iv) Shareholding Pattern of top ten Shareholders as on 31st March 2018 S For each of the Top 10 Shareholders Date Reason Shareholding at the Cumulative shareholding No. beginning of the year during the year No. of % of total No. of % of total shares shares shares shares 1 Name-CDC Group PLC At the beginning of the year 1,17,65,046 5.76 1,17,65,046 5.76 Changes during the year 0 0.00 0 0.00 At the end of the year 1,17,65,046 5.76 1,17,65,046 5.76 2 Name-Ashoka Investment Holdings Limited At the beginning of the year 88,94,128 4.35 88,94,128 4.35 Changes during the year 02.06.2017 Transfer 2,38,700 0.12 86,55,428 4.24 16.06.2017 Transfer 3,07,696 0.15 83,47,732 4.08 02.03.2018 Transfer 76,924 0.04 82,70,808 4.05 09.03.2018 Transfer 59,616 0.03 82,11,192 4.02 23.03.2018 Transfer 40,385 0.02 81,70,807 4.00 At the end of the year 81,70,807 4.00 81,70,807 4.00 3 Name-JP Morgan Mauritius Holdings IV Limited At the beginning of the year 79,82,716 3.91 79,82,716 3.91 Changes during the year 09.06.2017 Transfer 21,693 0.01 79,61,023 3.90 16.06.2017 Transfer 1,98,060 0.10 77,62,963 3.80 23.06.2017 Transfer 13,33,399 0.65 64,29,564 3.15 30.06.2017 Transfer 45,763 0.02 63,83,801 3.12 07.07.2017 Transfer 34,78,609 1.70 29,05,192 1.42 14.07.2017 Transfer 3,00,000 0.15 26,05,192 1.27 01.09.2017 Transfer 8,81,819 0.43 17,23,373 0.84 15.09.2017 Transfer 10,77,000 0.53 6,46,373 0.32 22.09.2017 Transfer 6,46,373 0.32 0 0.00 At the end of the year 0 0.00 0 0.00 4 Name-CDC India Oppurtunities Limited At the beginning of the year 43,60,804 2.13 43,60,804 2.13 Changes during the year 0 0.00 0 0.00 At the end of the year 43,60,804 2.13 43,60,804 2.13 Annual Report 2017-18 55 Company Overview Statutory Reports Financial Statements S For each of the Top 10 Shareholders Date Reason Shareholding at the Cumulative shareholding No. beginning of the year during the year No. of % of total No. of % of total shares shares shares shares 5 Name-Franklin Templeton Investment Funds At the beginning of the year 34,90,000 1.71 34,90,000 1.71 Changes during the year 14.07.2017 Transfer 9,79,342 0.48 44,69,342 2.19 13.10.2017 Transfer 3,555 0.00 44,65,787 2.19 26.01.2018 Transfer 48,316 0.02 45,14,103 2.21 At the end of the year 45,14,103 2.21 45,14,103 2.21 6 Name-Ambadevi Mauritius Holding Limited At the beginning of the year 26,67,804 1.31 26,67,804 1.31 Changes during the year 02.06.2017 Transfer 71,300 0.03 25,96,504 1.27 16.06.2017 Transfer 92,258 0.05 25,04,246 1.23 02.03.2018 Transfer 23,076 0.01 24,81,170 1.21 09.03.2018 Transfer 17,884 0.01 24,63,286 1.21 23.03.2018 Transfer 12,115 0.01 24,51,171 1.20 At the end of the year 24,51,171 1.20 24,51,171 1.20 7 Name-Ratnakar Shetty At the beginning of the year 20,43,608 1.00 20,43,608 1.00 Changes during the year 0 0.00 0 0.00 At the end of the year 20,43,608 1.00 20,43,608 1.00 8 Name-Murali Krishnan KN At the beginning of the year 20,07,553 0.98 20,07,553 0.98 Changes during the year 01.12.2017 Transfer 52,262 0.03 19,55,291 0.96 15.12.2017 Transfer 732 0.00 19,54,559 0.96 12.01.2018 Transfer 732 0.00 19,55,291 0.96 19.01.2018 Transfer 1,758 0.00 19,53,533 0.96 At the end of the year 19,53,533 0.96 19,53,533 0.96 9 Name-SBI Blue Chip Fund At the beginning of the year 18,50,778 0.91 18,50,778 0.91 Changes during the year 02.03.2018 Transfer 6,67,960 0.33 11,82,818 0.58 09.03.2018 Transfer 1,08,300 0.05 10,74,518 0.53 16.03.2018 Transfer 4,57,375 0.22 6,17,143 0.30 23.03.2018 Transfer 6,17,143 0.30 0 0.00 At the end of the year 0 0.00 0 0.00 10 Name-ICICI Prudential Long Term Equity Fund (Tax Saving) At the beginning of the year 17,79,986 0.87 17,79,986 0.87 Changes during the year 02.06.2017 Transfer 3,23,714 0.16 14,56,272 0.71 At the end of the year 14,56,272 0.74 14,56,272 0.74 (v) Shareholding of Directors and Key Managerial Personnel S Shareholding of each Directors and each Date Reason Shareholding at the Cumulative shareholding No. Key Managerial Personnel beginning of the year during the year No. of % of total No. of % of total shares shares shares shares 1 Name- Dr. Devi Prasad Shetty At the beginning of the year 6,47,00,571 31.66 6,47,00,571 31.66 Changes during the year 0 0.00 0 0.00 At the end of the year 6,47,00,571 31.66 6,47,00,571 31.66 2 Name- Ms. Kiran Mazumdar Shaw At the beginning of the year 47,05,671 2.30 47,05,671 2.30 Changes during the year 0 0.00 0 0.00 At the end of the year 47,05,671 2.30 47,05,671 2.30 56 Narayana Hrudayalaya Limited V. Indebtedness As On 31st March 2018 Indebtedness of the Company including interest outstanding/accrued but not due for payment. (` in mn) Particulars Secured Loans Unsecured Deposits Total excluding deposits Loans Indebtedness Indebtedness at the beginning of the financial year i) Principal Amount 1,195.27 0 0 1,195.27 ii) Interest due but not paid 0 0 0 0 iii) Interest accrued but not due 0.74 0 0 0.74 Total (i+ii+iii) 1,196.01 0 0 1,196.01 Change in Indebtedness during the financial year * Addition 4,044.75 0 0 4,044.75 * Reduction -325.78 0 0 -325.78 Net Change 3,718.97 0 0 3,718.97 Indebtedness at the end of the financial year i) Principal Amount 4,914.24 0 0 4,914.24 ii) Interest due but not paid 0 0 0 0 iii) Interest accrued but not due 0.38 0 0 0.38 Total (i+ii+iii) 4,914.62 0 0 4,914.62 VI. Remuneration of Directors and Key Managerial Personnel A. Remuneration to Managing Director, Whole-time Directors and/or Manager: S Particulars of Remuneration Name & Designation Total No. Amount Dr. Devi Prasad Shetty Dr. Ashutosh Raghuvanshi Mr. Viren Prasad Shetty (` ) Chairman & Vice Chairman, Whole-time Director Whole-time Director Group CEO & Managing Director 1 Gross salary (a) Salary as per provisions 4,47,60,404 2,81,92,393 87,99,996 8,17,52,793 contained in section 17(1) of the Income-tax Act, 1961 (b) Value of perquisites u/s 17(2) 39,600 39,83,499 40,23,099 Income-tax Act, 1961 (c) Profits in lieu of salary Nil Nil Nil 0 under section 17(3) Income- tax Act, 1961 2 Stock Option Nil Nil Nil 0 3 Sweat Equity NA NA NA 0 4 Commission Nil Nil Nil 0 - as % of profit - others, specify 5 Others, please specify 0 14,17,440 0 14,17,440 (NPS contribution) Others, please specify 77,19,360 54,32,794 17,54,404 1,49,06,558 (performance related pay) Total 5,25,19,364 3,90,26,126 1,05,54,400 10,20,99,890 Ceiling as per the Act (10% of profits calculated under section Within the limit 198 of the Companies Act, 2013) Annual Report 2017-18 57 Company Overview Statutory Reports Financial Statements B. Remuneration to other Directors S Particulars of Name of Directors Total No. Remuneration Mr. Manohar Mr. B N Mr. Arun Mr. Muthuraman Mr. Dinesh Ms. Kiran Amount D Chatlani Subramanya Seth Balasubramanian Krishna Mazumdar (` ) Swamy Shaw 1 Independent Directors Fee for attending Board 2,50,000 8,00,000 2,00,000 6,50,000 7,00,000 26,00,000 and Committee meetings Commission * 10,00,000 10,00,000 10,00,000 10,00,000 10,00,000 50,00,000 Others, please specify Total (1) 2 Other Non-Executive Directors Fee for attending Board 3,50,000 3,50,000 and Committee meetings Commission 10,00,000 10,00,000 Others, please specify Total (2) Total (B)=(1+2) 12,50,000 18,00,000 12,00,000 16,50,000 17,00,000 13,50,000 89,50,000 Total Managerial 89,50,000 Remuneration Overall Ceiling as per the Act (1% of the profits calculated under section Within the limit 198 of the Companies Act, 2013) *Commission paid of ` 10 Lakhs pertains to the FY 2016-17. C. Remuneration to Key Managerial Personnel other than MD/Manager/WTD S Particulars of Remuneration Name of Key Managerial Personnel & Total Amount No. Designation (` ) Mr. Venugopalan Mr. Sridhar S Kesavan CFO CS 1 Gross salary (a) Salary as per provisions contained in section 17(1) of the 1,40,84,328 30,16,730 1,71,01,058 Income-tax Act, 1961 (b) Value of perquisites u/s 17(2) Income-tax Act, 1961 0 (c) Profits in lieu of salary under section 17(3) Nil Nil 0 Income-tax Act, 1961 2 Stock Option Nil Nil 0 3 Sweat Equity Nil Nil 0 4 Commission Nil Nil 0 - as % of profit 0 - others, specify 0 5 Others, please specify (NPS Contribution) 4,19,376 61,664 4,81,040 Others, please specify (Employer PF) 21,600 21,600 43,200 Others, please specify (Performance related pay) 23,07,584 2,31,276 25,38,860 Others, please specify (Retention bonus) 25,00,000 0 25,00,000 Total 1,93,32,888 33,31,270 2,26,64,158 58 Narayana Hrudayalaya Limited VII. Penalties / Punishment/ Compounding Of Offences Type Section of the Brief Details of Penalty / Authority [RD / Appeal made, Companies Act Description Punishment/ Compounding NCLT/ COURT] if any (give fees imposed Details) A. COMPANY Penalty Nil Nil Nil Nil Nil Punishment Nil Nil Nil Nil Nil Compounding Nil Nil Nil Nil Nil B. DIRECTORS Penalty Nil Nil Nil Nil Nil Punishment Nil Nil Nil Nil Nil Compounding Nil Nil Nil Nil Nil C. OTHER OFFICERS IN DEFAULT Penalty Nil Nil Nil Nil Nil Punishment Nil Nil Nil Nil Nil Compounding Nil Nil Nil Nil Nil Dr. Ashutosh Raghuvanshi Mr. Viren Shetty Place: Bengaluru Vice Chairman, Group CEO & Managing Director Whole-time Director Date: 29th May 2018 DIN: 02775637 DIN: 02144586 Annual Report 2017-18 59 Company Overview Statutory Reports Financial Statements Annexure IV Narayana hrudayalaya CORPORATE SOCIAL RESPONSIBILITY ACTIVITIES (“NH CSR”) 1. Brief outline of NH CSR Policy and Ensured that the CSR activities are in conformity to the overview of programs undertaken activities mentioned in Schedule VII of the Companies during the financial year 2017-18: Act, 2013. 1.1 Brief outline of NH CSR Policy: Approved the CSR policy as recommended by the CSR 1.1.1 NH CSR Policy Statement: Committee. NH aims to make a positive difference in the lives of the Ensured that the Company spent the approved budget people by engaging in activities that eliminates or alleviates in the financial year to comply with Section 135 of pain and suffering to the under privileged sections of the Companies Act, 2013 and Rules notified. society. CSR Committee has: 1.1.2 NH CSR Objectives: Promoting healthcare facilities for the upliftment of Formulated and recommended the CSR Policy for people at large and creating a positive impact by approval of the Board. addressing issues of accessibility and affordability. Recommended CSR programmes and budget Promoting educational facilities to help and assist allocation. in unfolding the creative potentials and talents of the Instituted a transparent monitoring mechanism for children and amateurs. implementation of the CSR activities and expenditure of Strive for socio-economic development thereby funds. reducing inequality between rich and poor. Taken professional support from individuals and organisations having expertise in related fields to carry 1.1.3 NH CRS Focus Areas out aforesaid activities. Healthcare Education 1.1.6 Project based approach: NH follows a project-based approach for carrying out its 1.1.4 NH CSR Projects (discussed in detail in later section CSR initiatives. of the report) Rajiv Gandhi Arogya Yojana (RAY) 1.1.7 Overview of projects/programs undertaken during the Financial Year 2017-18: Railway Clinics Rajiv Gandhi Arogya Yojana (RAY): Mobile Mammography Screening This program was initiated in November 2005 to develop Care Companion Program a model of rural primary health care system in Amethi. The project currently includes 4 Primary Healthcare Clinics E -Health Centers spread across four blocks of Amethi constituency and Udaan covers the basic healthcare needs of around 200 villages catering to a population of more than 60,000 people. Since Shorapur Maternal Obstetric Monitoring (MOM) its inception, the program has served more than 20,65,000 Program patients from marginalized communities. In the past year, Community Radio Station initiative more than 13,000 patients availed primary healthcare services at these clinics. Non-communicable diseases (NCD) program 1.1.5 Governance and Administration Railway Clinics: Board of Directors has: This program was initiated in July 2011 in the State of Karnataka in collaboration with Southern Railways. Appointed CSR Committee The objective is to provide timely care to the patients or 60 Narayana Hrudayalaya Limited accident victims in railway stations, and thereby curb the medical situation while 87% stated that they felt confident increasing number of deaths due to railway accidents. of handling patient care requirements after attending the These centres provide basic medical assistance and program. emergency needs before the patient reaches the hospital. Since inception, these clinics have helped treat 13,936. e - Health Centre Program (eHCs): In past financial year, the majestic railway clinic treated The program focuses on delivering quality and affordable around 1403 passengers. primary health care to people living in resource-deprived locations of India using appropriate technologies. NH is Mobile Mammography Screening: the healthcare partner to implement, operate and manage Breast cancer is the commonest cancer in urban Indian eHealth Centres. The centres are rapidly deployable women and second most common in rural women, with healthcare facilities powered by cloud-enabled solutions 140,000 new breast cancer patients being diagnosed and fully equipped with workstations, open electronic annually (Indian Council of Medical Research, 2001; Ferlay, records (EMR) systems, biometric patient identification et al., 2013). Ubiquitous realities such as lack of organized and integrated diagnostic services. A Total of 9 eHealth screening programs, paucity of diagnostic aids, patriarchal Centres have been established in states of Karnataka, West mind-set, illiteracy and lack of awareness have resulted in Bengal, Rajasthan and Gujarat. A total footfall of 64,037 majority of women being diagnosed at a locally advanced has been witnessed since inception. In the last financial stage (Agarwal, Pradeep Aggarwal, Yip, & Cheung, 2007). year, 28,572 patients were provided teleconsultations, The effort therefore, of the mammography screening 3,200 people were screened through 40 general and program, has been to educate, screen, identify and refer specialty camps and 144 community meetings were patients for further treatment. Since February 2014, the conducted to educate local population on the prevalent program has provided screened more than 20,000 women diseases and ways of prevention. As per the findings of through 541 camps organized across several districts a socio-economic impact study conducted across five in Karnataka. In the process, 5,335 mammograms were centres to understand out of pocket expenditures in the conducted and till date, 43 women have been diagnosed community on healthcare, there has been a reduction in with breast cancer and treated successfully. In the past direct expenses (consultation, medicines, investigations) financial year, the program reached out to 7,000 women by 36% and indirect expenses (wage loss, travel cost) by through 171 camps and 2,048 mammograms were 44% post inception of eHCs. conducted. Case Narration: Care Companion Program: A 17-year-old girl named Farha Jabi visited Tikiapara eHC The Care Companion Program (CC Program) was first set in West Bengal with complaint of difficulty in breathing. As up in 2013 in the NH Hospital in Mysore. The program was advised, she underwent echocardiogram at the centre, started in direct response to the needs of patients and to leading to provisional diagnosis of valvular heart disease. recognize patient family members as an untapped existing She was immediately referred to NH Hospital in Kolkata resource. This program is designed to educate patient where the diagnosis was confirmed, and surgery was family members with low or no prior medical knowledge for advised. Belonging to poor socio-economic background, attending to the needs of patients. The program undertakes Farha was provided financial supported through NH CSR in-hospital education-cum-training program for patients’ and the associated local NGO for the surgery. She was family members. Multi-lingual group teaching sessions treated successfully and has been leading a healthy life use interactive videos for identifying warning signs of since then. illness, checking temperature, pulse, blood pressure, timely medications etc. These sessions are conducted Udaan: in Hindi, Tamil, English, Telugu, Bengali, Assamese and India has a large shortfall of doctors. According to the Kannada. The program has been implemented across World Health Organization, India has seven doctors 24 facilities of NH, wherein the program was introduced for every 10,000 people, half the global average. These in five facilities in the last financial year. Since its inception shortages exist despite India having one of the largest in 2013, more than 80,000 families have been educated, medical education systems in the world. The unwillingness with 45,000 families who were trained in the last financial of doctors to work in rural areas is another challenge. year. As per an impact study conducted across five units Considering these twin challenges, the objective of the to assess caregiver competencies and perception, 82% of program has been to nurture the potential of rural students the care givers stated that they have learnt to deal with the from disadvantaged backgrounds and create a platform Annual Report 2017-18 61 Company Overview Statutory Reports Financial Statements which they could leverage on towards realizing medical Community Radio program education. Students from our Udaan program can be The Company has supported Narayana Hrudayalaya motivated to use their medical education in improving Foundation for the Community Radio Programme and the health care systems in their villages and small towns. It Foundation was granted 90.4 spectrum wireless operating is hoped that these enabled students would fulfil their license in January 2017 for establishing a community dreams of becoming able physicians, have a multiplier radio station in Health city, Anekal. The broader objective effect among students and practice ethical healthcare of our community radio station is to serve as a consensus- thereby serving the larger community. In collaboration with building platform wherein communication processes Mindtree, 56 high-school students had been identified for would help the communities around us to share common the program of which 26 students progressed to join Jain understanding and common goals. The community University. With additional support from Jain University, radio was named “Namma Nadi” with focus on health, the students have been coached, mentored and would be education, environment, culture and civic issues within appearing for medical selection test in current year. The the primary and secondary zones of health city. Various Udaan Bidar program was initiated with Shaheen group programs were aired on Namma Nadi with participation of Institutions in Bidar wherein 20 pre-university students from multiple communities of interest. have been selected and provided full scholarship. The Udaan students are regularly motivated and mentored by Non-Communicable Diseases (NCD) Program NH panel of doctors. This new program was initiated in June 2017 with a focus to improve awareness and conduct screening for non- Shorapur Maternal Obstetric Monitoring program communicable diseases including breast and oral cancer. Yadgir District has been identified by the Ministry of The focus has been on a continuum of activities including Health and Family Welfare as a High Priority District for promotive, preventive and curative services. The program the implementation of focused health care interventions has been initiated at five locations – Mysore, Jamshedpur, under National Health Mission (NHM). Based on statistical Delhi, Howrah and Bangalore. In collaboration with various data for maternal healthcare indices, it was decided to local institutions, government healthcare bodies and non- pilot maternal healthcare interventions in Shorapur Taluk governmental organizations, the program has been able of Yadgir District. The program leveraged on workflow to serve more than 5,000 people in the last year. Post improvements and technology innovations to address the awareness sessions conducted by the NCD team, early detection & referral of high risk pregnancies. Our impact assessment surveys were conducted amongst a team stationed in Shorapur co-ordinated free drives for section of the population and it was found that there had Ultrasonography (USG), High Risk Pregnancy detection been an overall increase of 40% in the knowledge about (HRP), as well as blood transfusion for anaemic pregnant breast and oral cancer amongst the respondents. Patients women. Since November 2016, NH radiologists have identified with oral lesions or breast pathologies were regularly travelled to Shorapur and have conducted 5185 further provided free consultation, biopsies and relevant free USG reviews for pregnant women. Almost 20% of the diagnostic interventions. pregnant women were diagnosed with high-risk conditions and referred to nearest District hospital. Narayana Health 2. Composition of CSR Committee: introduced High Risk Pregnancy identification forms to Mr. Dinesh Krishna Swamy Chairman evaluate and identify high risk pregnancy at the government Mr. B N Subramanya Member general hospital. With implementation of this workflow Dr. Ashutosh Raghuvanshi Member innovation, there has been a 50% rise in detection of high risk pregnancy cases. Over the past year, our team has 3. Average Net Profit (before tax) for also co-ordinated the blood transfusion for 268 severely last three financial years is ` 967.90 mn anaemic women at the Government General Hospital. Regular communitisation activities were conducted by 4. Prescribed CSR expenditure (i.e. 2% of field staff to improve awareness towards anemia, signs the amount mentioned inpoint 3 above) and symptoms of high risk pregnancies and need for early is ` 19.36 mn referral of pregnant women identified with such conditions. 62 Narayana Hrudayalaya Limited 5. Details of CSR spent during Financial Year: (` in mn) S. No. CSR project or Sector in Projects or Amount Amount spent on projects Cumulative Amount activity identified which the programs outlay or programs Sub-heads: expenditure spent: Direct project is (1) Local area or (budget) Direct Overheads up to the or through covered other project or Expenditure reporting implementing (2) Specify the programs on projects or period agency State and district wise programs where the projects or programs were undertaken 1. Rajiv Gandhi Healthcare Amethi, 1.87 1.75 0.29 2.04 Direct Arogya Yojana and Enhancing Uttar Pradesh (RAY) livelihood 2. Railway Clinics Healthcare Karnataka 1.69 0.60 0.01 0.70 Direct 3. Mobile Healthcare Karnataka 2.72 2.84 0.47 3.31 Direct Mammography Screening 4. Care Companion Healthcare PAN India 1.89 0.67 0.11 0.78 Direct Program and Enhancing livelihood 5. Udaan – A Promoting Karnataka 0.58 0.52 0.09 0.61 Direct Scholarship Education Programme 6. E-Health Center Healthcare PAN India 5.46 6.17 1.02 7.19 Direct and Enhancing livelihood 7. Shorapur MOM Healthcare Karnataka 2.61 2.27 0.38 2.66 Direct Program 8. Community Radio Healthcare Karnataka 0.68 0.04 0.006 0.04 Direct and Enhancing livelihood 9. NCD Healthcare Karnataka 2.67 4.17 0.78 5.49 Direct and Enhancing livelihood 10. Ground Water Healthcare Karnataka 0.30 - - - Direct Recharge and Enhancing livelihood Total 20.45 19.59 3.23 22.82 6. Our responsibility statement: We hereby affirm that the CSR Policy, as approved by the Board, has been implemented and the CSR Committee monitors the implementation of CSR projects and activities in compliance with our CSR objectives. Dr. Ashutosh Raghuvanshi Mr. Viren Shetty Vice Chairman, Group CEO & Managing Director, Whole-time Director DIN: 02775637 DIN: 02144586 Place: Bengaluru Date: 29th May 2018 Annual Report 2017-18 63 Company Overview Statutory Reports Financial Statements Annexure V PARTICULARS OF EMPLOYEES The information required pursuant to Section 197 read with c. The percentage increase in the median remuneration of Rule 5 of the Companies (Appointment and Remuneration of employees in the financial year: 10% Managerial Personnel) Rules, 2014 in respect of employees of the Company is detailed as under: d. The number of permanent employees on the rolls of Company: 10,737 a. The ratio of the remuneration of each Director to the median remuneration of the employees of the Company for the e. Average percentile increase already made in the salaries financial year: of employees other than the managerial personnel in the last financial year and its comparison with the percentile Non-Executive Directors Ratio to median increase in the managerial remuneration and justification remuneration thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration. Mr. Muthuraman 4.98 Balasubramanian On an average, employees received an annual increase Mr. Dinesh Krishna Swamy 4.98 of 9% based on individual performance against the managerial remuneration of 5.5%. Mr. Manohar D Chatlani 4.98 Mr. Arun Seth 4.98 f. Affirmation that the remuneration is as per the remuneration Ms. Kiran Mazumdar Shaw 4.98 policy of the Company. Mr. B N Subramanya 4.98 The Company affirms that the remuneration is as per the remuneration policy adopted by the Company. Executive Directors Ratio to median remuneration Dr. Devi Prasad Shetty 261.30 Mr. Viren Shetty 52.55 Dr. Ashutosh Raghuvanshi 194.31 b. The percentage increase in remuneration of each Director, Chief Financial Officer, Chief Executive Officer, Company Secretary or Manager, if any, in the financial year: Directors, Chief Executive Officer, Chief % Financial Officer, Company Secretary increase Dr. Devi Prasad Shetty 3% Mr. Viren Shetty 14% Dr. Ashutosh Raghuvanshi 3% Mr. Venugopalan Kesavan 15% Mr. Sridhar S* 0.0% * Mr. Sridhar S was appointed in March 2017 64 Narayana Hrudayalaya Limited Annexure VI CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO The information on conservation of energy, technology f. Based on the outcomes of Life Cycle Cost assessment, absorption and foreign exchange earnings and outgo stipulated an additional capex of ~` 2 mn was incurred to under Section 134(3)(m) of the Companies Act, 2013 read with procure high-efficiency chillers at facilities located in Rule 8 of the Companies (Accounts) Rules, 2014 is given below: Jaipur and Bengaluru. (A) Conservation of energy g. Reasonable power factor improvement and contract Process improvement and utilization of existing resources demand optimization has been achieved at facilities was taken as a key agenda for Energy Conservation located in Kolkata (5 facilities), Jamshedpur and initiatives in financial year 2017-18 in the Company. Various Bengaluru. A consistent power factor of 0.95 or more initiatives have been undertaken by the Company to is maintained at majority of facilities, resulting in an optimize the energy usage and cost. anticipated savings of ` 1.9 mn/year from power factor incentives. Key energy conservation measures executed in the Financial Year 2017-18 are summarized below: h. Further optimization of operating procedures expected to deliver a partially intangible savings of ` 4.4 mn/ a. Completed six (6) comprehensive energy audits year. at hospitals located in Bangalore, Howrah, Jaipur, Ahmedabad, Kolkata, Jamshedpur in association with i. Gradual replacement of conventional lighting system a renowned Industry Expert. with LEDs are carried out across the NH group and procurement of other conventional lights has been b. Internal energy audits through in-house Energy minimized wherever possible. Manager/Auditor at 12 hospitals located across India. j. Following table summarizes savings achieved in c. Following improvement measures identified in audits were Financial Year 2017-18 with specific efforts on energy budgeted for implementation in Financial Year 2018-19: conservation and energy cost savings: (` in mn) Installation of Variable Frequency Drives (VFD)/ Activity Benefits Electronically Controlled (EC) motors for Air (Approximate) Handling Units Operating Procedure 2.40 Installation of Eco-Mesh/Adiabatic Cooling Optimization System for Chillers Energy Conservation Project 1.42 through Bosch Chiller and Pump Replacement Sourcing Renewable Energy 2.00 Solar Roof Top Panels through Open Access (Total 20 Lac kWh was sourced from Dec Energy Monitoring System 2017) Power Factor Improvement and 1.59 d. More than 85% total energy consumption at Health Contract demand optimization City Campus, Bengaluru are sourced from Renewable Total 7.41 energy sources i.e. Solar Power. Note: The numbers presented above are those calculated for the time from which various activities were commissioned e. Successfully commissioned an energy conservation which were mostly towards middle of the financial year. project worth ` 9.1 mn, at Health City Campus located Hence, they do not represent the annual benefit, and in Bengaluru resulting in an estimated savings of ` 3.4 represent only the approximate values of actual benefits in mn/year. the financial year 2017-18. Annual Report 2017-18 65 Company Overview Statutory Reports Financial Statements (B) Technology absorption (ii) The benefits derived like product improvement, (i) The efforts made towards technology absorption cost reduction, product development or import are detailed as under substitution 1. Patient engagement platform was released in Reduce complexity selected units successfully enabling patients to access their reports and schedule appointments Transform digitally by reducing manual digitally through app and web-portal. The intervention platform would be expanded to include various other patient centric features aimed at improving Reduce possibilities of non-compliance to their experience and broadening their interaction information security guidelines with Narayana Health. Improve overall turnaround time 2. Identity consolidation across business applications was carried out ensuring that the (iii) In case of imported technology (imported during users could use the same credentials to log in to the last three years reckoned from the beginning their Office 365 (Email and Collaboration suite), of the financial year) NEST (Employee Self Service Portal), Complaint The Company is in the business of providing Management System, IT Service Management healthcare services and it continues to use the latest portal and their respective desktops and technology through import of medical equipments. laptops. This measure is aimed at reducing the complexity for the Company’s staff. (iv) The expenditure incurred on Research and Development- 3. Automation of user creation, role assignment NIL and user deactivation in various applications was also rolled out reducing manual intervention, (C) Foreign exchange earnings and increasing accuracy and improving the overall expenditure: turnaround time. This measure improves the (amount in ` mn) overall compliance to information security guidelines. Particulars 2017-18 2016-17 Foreign Exchange Earnings 1,045.35 299.21 4. Healthcare incident tracking app was rolled out Foreign Exchange Expenditure 31.98 36.06 in pilot hospitals to ensure a real-time logging Value of Imports on CIF Basis 128.46 217.34 of all clinical incidents. Through ease of use the app targets to improve compliance in reporting and provide a wealth of data for analysis to derive insights into areas of improvement. This aims to improve the quality of clinical outcomes in the long run. 5. Group-wide laptop, desktop, email and server protection was bolstered through the adoption of new solutions, vulnerability tests and other related measures ward off virus, ransomware and malware attacks. Information security continues to be a key focus area for Company’s IT. 66 Narayana Hrudayalaya Limited Annexure VII CORPORATE GOVERNANCE REPORT 1. Corporate Governance Philosophy A Report on Corporate Governance, in accordance with the Your Company is committed to the principles of SEBI (Listing Obligations and Disclosure Requirements) ‘Accountability’, ‘Transparency’ and ‘Trusteeship’ in its Regulations, 2015, is outlined below. dealing with stakeholders. Accordingly, in the endeavor to take balanced care of stakeholders, your Company 2. Board of Directors adheres to good Corporate Governance practices in its The Board of Directors (the Board) is at the core of the business processes. Company’s Corporate Governance practices and oversees how Management serves and protects the long-term The Company is conscious of the fact that the success of interest of its stakeholders. It brings in strategic guidance, an organization reflects the professionalism, conduct and leadership and an independent view to the Company’s ethical values of its management and employees. In addition Management while discharging its fiduciary responsibilities, to compliance with regulatory requirements, the Company thereby, ensuring that Management adheres to highest endeavors to ensure that highest standards of ethical and standards of ethics, transparency and disclosure. responsible conduct are met throughout the organization. The Company has a strong legacy of fair, transparent The Board consists of an optimal combination of Executive and ethical governance practices. The Company has and Non-Executive Independent Directors, representing a adopted a Code of Conduct for its Board Members judicious mix of in-depth knowledge and experience. and Senior Management. In addition, the Company’s terms of appointment of Independent Directors suitably (a) Composition and Category of Directors incorporates the duties of Independent Directors as laid The Board comprises of 9 (Nine) Directors viz. 3 down in the Companies Act, 2013. These Codes and terms (Three) Executive Directors and 6 (Six) Non-Executive of appointment are available on the Company’s website Directors including 5 (Five) Independent Directors and can be accessed at https://www.narayanahealth.org/ and One-Woman Director. stakeholder-relations/company-policies. Composition of the Board and Committee composition as on 31st March 2018 are given below S. Name of Designation Category Board Audit, Risk and Corporate Social Nomination and Stakeholders’ No. Director Compliance Responsibility Remuneration Relationship Committee Committee Committee Committee 1 Dr. Devi Prasad Chairman & Promoter √√ - - - - Shetty Whole-time Director 2 Dr. Ashutosh Vice Chairman, Executive √ - √ - √ Raghuvanshi Group CEO Director and Managing Director 3 Mr. Viren Shetty Whole-time Executive √ - - - √ Director Director 4 Ms. Kiran Director Non-Executive √ - - √ - Mazumdar Shaw Woman Director 5 Mr. Manohar D Director Independent √ - - - - Chatlani Non-Executive 6 Mr. Dinesh Director Independent √ √ √√ √ - Krishna Swamy Non-Executive Annual Report 2017-18 67 Company Overview Statutory Reports Financial Statements S. Name of Designation Category Board Audit, Risk and Corporate Social Nomination and Stakeholders’ No. Director Compliance Responsibility Remuneration Relationship Committee Committee Committee Committee 7 Mr. Muthuraman Director Independent √ √ - √√ * √√ Balasubramanian Non-Executive 8 Mr. Arun Seth Director Independent √ - - √√** - Non-Executive 9 Mr. B.N Director Independent √ √√ √ - √ Subramanya Non-Executive √√-Chairperson √-Member * Mr. Muthuraman Balasubramanian was the Chairman of Nomination and Remuneration Committee from 25th October 2017 to 26th March 2018. ** Directorship of Mr. Arun Seth stood vacated according to the list of disqualified Directors published by Registrar of Companies, Kolkata under Section 164 (2) of the Companies Act, 2013 as one of the Companies in which Mr. Arun Seth was a Director failed to file requisite Returns with the Registrar of Companies, Kolkata. The Board of Directors of the Company at its meeting held on 25th October 2017 took note of the vacation of office of Directorship of Mr. Arun Seth in the Company. Subsequently, Mr. Arun Seth was granted an interim injuction by the Calcutta High Court against the disqualification. Consequently, Mr. Arun Seth was reinstated as the member of the Board on 31st January 2018 and as a member and Chairman of the Nomination and Remuneration Committee on 26th March 2018. (b) Changes in the composition of the Board Change in designations and appointments No changes in designations and appointments of the Directors took place during the year under review. Ms. Kiran Mazumdar Shaw, Non-Executive Director who retired by rotation was re-appointed as Director at the Seventeenth Annual General Meeting of the Company held on 3rd August 2017. Resignations or removal of the Directors, if any None of the Directors resigned during the year under review. Disqualification of the Directors, if any During the year under review, Mr. Arun Seth was disqualified to be a Director of a Company. On 15th November 2017, he had secured an interim injuction from Kolkata High Court whereby his disqualification was set aside, and he could continue to be a Director on Board of the Companies in which he was serving as a Director before the disqualification notification. Consequent to the order, Mr. Arun Seth was reinstated on the Board of the Company at a Meeting of the Board of Directors held on 31st January 2018. (c) Attendance of each director at the Board Meetings and the last Annual General Meeting Directors Number of Board Meetings Attendance at the last Held Attended Annual General Meeting Dr. Devi Prasad Shetty 07 07 Yes Dr. Ashutosh Raghuvanshi 07 07 Yes Ms. Kiran Mazumdar Shaw 07 05 Yes Mr. Muthuraman Balasubramanian 07 06 Yes Mr. B N Subramanya 07 07 Yes Mr. Manohar D Chatlani 07 05 No Mr. Viren Shetty 07 07 Yes Mr. Dinesh Krishna Swamy 07 07 Yes Mr. Arun Seth 07 04 Yes (d) Number of other Boards or Board Committees in which Director is a Member or Chairperson Number of Directorships and Committee Chairmanships / Memberships held by Directors in other public companies as on 31st March, 2018 are given herein below. Other directorships do not include directorships of private limited companies, foreign companies and companies under Section 8 of the Companies Act, 2013. Chairmanships / Memberships of Board Committees includes only Audit Committee and Stakeholders’ Relationship Committee. 68 Narayana Hrudayalaya Limited S. Name of the Director No. of No. of memberships in No. of post of Chairperson No. Directorship Audit/ Stakeholders‘ in Audit/ Stakeholders‘ in other public Relationship Committee(s) Relationship Committee entities including in other public entities held in public entities this entity including this entity including this entity 1 Dr. Devi Prasad Shetty 2 0 0 2 Dr. Ashutosh Raghuvanshi Stakeholders’ Relationship 0 2 Committee-1 Audit Committee – 1 3 Mr. Viren Shetty Stakeholders’ Relationship 0 2 Committee-1 4 Ms. Kiran Mazumdar Shaw 8 0 0 5 Mr. Manohar D Chatlani 1 0 0 6 Mr. Dinesh Krishna Swamy 1 Audit Committee-1 0 7 Mr. Muthuraman Audit Committee -2 Stakeholders’ Relationship Balasubramanian 3 Stakeholders’ Relationship Committee -1 Committee – 1 8 Mr. Arun Seth Audit Committee-4 Audit Committee-1 7 Stakeholders’ Relationship Committee – 1 9 Mr. BN Subramanya Audit Committee -2 Audit Committee -2 2 Stakeholders’ Relationship Committee -1 (e) Number of Board meetings held, dates on the Board as a whole. During the Financial Year under which held review, the Independent Directors met on 26th March During the financial year under review 07 (Seven) 2018 and all the Independent Directors attended the Board Meetings were held on 29th May 2017, 21st Meeting. July 2017, 2nd August 2017, 25th October 2017, 6th November 2017, 31st January 2018 and 26th March (g) Pecuniary Relationship 2018. The gap between two Board Meetings did There were no pecuniary relation or transactions of not exceed 120 (One Hundred and Twenty) days as Non-Executive Directors vis-a-vis the Company other required under Section 173 of the Companies Act, than: 2013 read with Rule 3 & 4 of the Companies (Meetings of Board and its Powers) Rules, 2014 along with a. The sitting fees, commission and reimbursement Regulation 17 (2) of the SEBI (Listing Obligations and of expenses incurred by them for the purpose of Disclosure Requirements) Regulations, 2015. These attending meetings of the Company. Meetings were well attended including Independent Directors. b. Ms. Kiran Mazumdar Shaw (Non-Executive Director) holds 4705671 equity shares of ` 10 (f) Meeting of Independent Directors each of the Company as on 31st March 2018. The Company’s Independent Directors are required to meet at least once in every Financial Year in (h) familiarization Programs for Board Members compliance with the provisions of the Companies The Board Members are provided with necessary Act, 2013. Such meetings are conducted to enable documents/ brochures, reports and internal policies Independent Directors to discuss the matters to enable them to familiarize with the Company’s pertaining to the Company’s affairs and put forth their procedures and practices. views. Further, Independent Directors also review the performance of the Non-Independent Directors, Periodic presentations are made at the Board and Chairperson (after considering the views of Executive Committee Meetings, on business and performance and Non-Executive Directors of the Company) and updates of the Company, operations review, quarterly Annual Report 2017-18 69 Company Overview Statutory Reports Financial Statements and annual results, budgets, review of internal The ability to contribute by introducing international best audit reports and action taken reports, statutory practices to address business challenges and risks. compliances, risk management, operations of Active participation in long-term strategic planning. subsidiaries and business strategy and risks involved. Such presentations and documents provide an Commitment to the fulfilment of a Director’s opportunity to the Independent Directors to interact obligations and fiduciary responsibilities; these include with the Senior Management Team of the Company participation in Board and Committee meetings. and help them understand the Company’s strategy, operations, services, organization structure, finance, To improve the effectiveness of the Board and its human resources, technology, quality and such other Committees, as well as that of each individual Director, a areas as may arise from time to time. formal Board review is internally undertaken on an Annual basis. The Members may refer to the Board’s Report for the The Policy on the familiarization programs for evaluation process followed by the Company. Independent Directors and their terms of appointment are also posted on the website of the Company and 5. Audit, Risk and Compliance Committee can be accessed at https://www.narayanahealth.org/ The Audit, Risk and Compliance Committee has been stakeholder-relations/company-policies. constituted in terms of Section 177 of the Companies Act, 2013 read with Regulation 18 and 23 of SEBI (Listing 3. Board Procedure Obligations and Disclosure Requirements) Regulations, A detailed agenda and notes thereon are sent to each 2015. Director in advance of Board and Committee Meetings. All material information is incorporated in the agenda for The Terms of Reference of Audit, Risk and Compliance facilitating meaningful and focused discussions at the Committee are broadly as follows: meeting. Where it is not practicable to attach any documents The Audit, Risk and Compliance Committee provides with the agenda, it is tabled before the meeting with specific direction to the audit function and monitors the quality reference to this effect in the agenda. To enable the Board of internal and statutory audit. The Committee functions to discharge its responsibilities effectively, the Board is kept as per the provisions of SEBI (Listing Obligations and abreast at every meeting on the overall performance of the Disclosure Requirements) Regulations, 2015 and the Company. All the relevant reports are also presented at the provisions of the Companies Act 2013. The responsibilities Board Meetings. of the Committee include review of the Quarterly and The Chairman of the Board and Company Secretary, in Annual financial statements before submission to Board, consultation with other concerned members of the Senior review and approval of related party transactions, review Management, finalizes the agenda for Board meetings. of compliance of internal control system, overseeing the financial reporting process to ensure transparency, Every Board member can suggest the inclusion of additional sufficiency, fairness and credibility of financial statements items in the agenda. The Board meets at least once a etc. The Committee also reviews the functioning of whistle quarter to review the quarterly results and other items on blower mechanism, adequacy and effectiveness of internal the agenda and also on the occasion of the Annual General audit function, risk management and control systems, Meeting. Additional meetings are held when necessary. review of management discussion and analysis of financial condition and results of operation. 4. Board member evaluation One of the key functions of the Board is to monitor and As on 31st March 2018, the Audit, Risk and Compliance review the Board evaluation framework. The Board works Committee comprised of 3 Directors. All are Independent with the Nomination and Remuneration Committee to lay Directors and the details of the same are as follows: down the evaluation criteria for the performance of the Director Nature of Designation Chairman, the Board, Board Committees and Executive / Directorship Non-Executive / Independent Directors. 1. Mr. B N Subramanya Independent Chairman Some of the performance indicators, based on which the Director Independent Directors are evaluated include: 2. Mr. Dinesh Krishna Independent Member Swamy Director The ability to contribute to and monitor our corporate 3. Mr. Muthuraman Independent Member governance practices. Balasubramanian Director 70 Narayana Hrudayalaya Limited Meetings and attendance during the year Meetings and attendance during the year: Name of the Date of No. of No. of Name of the Date of No. of No. of members Committee meetings meetings members Committee meetings meetings attending the Meeting held attended attending the Meeting held attended meeting meeting Mr. B N Subramanya 26th May 2017 6 6 Mr. Arun Seth* 26th May 2017 3 0 Mr. Dinesh Krishna 29th May 2017 6 6 Mr. Muthuraman 06th November 3 2 Swamy 02nd August 2017 Balasubramanian** 2017 Mr. Muthuraman 06th November 2017 6 6 Ms. Kiran 26th March 2018 3 2 Balasubramanian 31st January 2018 Mazumdar Shaw rd 23 March 2018 Mr. Dinesh Krishna 3 3 Swamy ** Directorship of Mr. Arun Seth stood vacated according to the list of 6. Nomination and Remuneration Committee disqualified Directors published by Registrar of Companies, Kolkata under Section 164 (2) of the Companies Act, 2013 as one of the Companies in The scope and function of the Nomination and which Mr. Arun Seth was a Director failed to file requisite Returns with the Remuneration Committee is in accordance with Section Registrar of Companies, Kolkata. The Board of Directors of the Company 178 of the Companies Act, 2013 read with Regulation 19 at its meeting held on 25th October 2017 took note of the vacation of office and Part D of Schedule II of SEBI (Listing Obligations and of Directorship of Mr. Arun Seth in the Company. Subsequently, Mr. Arun Disclosure Requirements) Regulations, 2015. Seth was granted an interim injuction by the Calcutta High Court against the disqualification. Consequently, Mr. Arun Seth was reinstated as the member of the Board on 31st January 2018 and as a member and Chairman of the The Terms of Reference of the Nomination and Remuneration Nomination and Remuneration Committee on 26th March 2018. Committee includes determination of the Company’s policy ** Mr. Muthuraman Balasubramanian was the chairman of Nomination and on specific remuneration packages for the Executive Remuneration Committee from 25th October 2017 to 26th March 2018. Directors, oversee the framing, review and implementation of compensation policy of the Company on behalf of 7. Stakeholders’ Relationship Committee the Board. The Committee’s terms also include to form a The members of the Stakeholders’ Relationship Committee policy, procedures and schemes and to undertake overall are: supervision and administration of Employee Stock Option Director Nature of Designation Plan (ESOP) of the Company and to review the Board Directorship structure, size and composition and make recommendation for any change. The Committee also formulates evaluation 1. Mr. Muthuraman Independent Chairman criteria for Directors and the Board. Balasubramanian Director 2. Mr. B. N. Independent Member The Nomination and Remuneration Policy is also posted Subramanya Director on the website of the Company and can be accessed at 3. Dr. Ashutosh Vice Chairman, Member https://www.narayanahealth.org/stakeholder-relations/ Raghuvanshi Group CEO & company-policies. Managing Director 4. Mr. Viren Shetty Whole-time Director Member The composition, name of members and chairperson of the Nomination and Remuneration Committee are as under: Meetings and attendance during the year: Director Nature of Designation Name of the Date of No. of No. of Directorship members Committee meetings meetings attended the Meeting held attended 1. Mr. Arun Seth* Independent Chairman meeting Director Mr. Muthuraman 29th May 2017 4 4 2. Mr. Muthuraman Independent Chairman Balasubramanian 02nd August 2017 Balasubramanian** Director Dr. Ashutosh 31st January 2018 4 4 3. Mr. Dinesh Krishna Independent Member Raghuvanshi 26th March 2018 Swamy Director Mr. B N 4 4 4. Ms. Kiran Non-Executive Member Subramanya Mazumdar Shaw Director Mr. Viren Shetty 4 4 Annual Report 2017-18 71 Company Overview Statutory Reports Financial Statements The scope and function of the Stakeholders’ Relationship Meetings and attendance during the year Committee is in accordance with Section 178 of the Name of the Date of No. of No. of Companies Act, 2013. The terms of reference of the members Committee meetings meetings Stakeholders’ Relationship Committee of our Company attended the Meeting held attended include effectively overseeing the resolution of the meeting grievances of the security holders of the company including Mr. Dinesh 02nd August 2017 3 3 complaints related to transfer of shares, non-receipt of Krishna 06th November Annual Reports, resolving investors’ complaints pertaining Swamy 2017 rd to share transfers, issue of duplicate share certificates, Mr. B N 23 March 2018 3 3 transmission of shares and other shareholder related Subramanya queries, complaints etc. Dr. Ashutosh 3 3 Raghuvanshi The details with regard to Stakeholders’ grievances as on 31st March 2018 are: The Committee owns the Corporate Social Responsibility Policy and recommends any changes S. Particulars Related Details to the Policy (or related activities) from time to No. time to the Board. The Committee also oversees 1. Name of the Non-Executive Mr. Muthuraman the implementation of the Policy, approves plans/ Director heading the Balasubramanian programs. Committee (Independent Director), Chairman The Corporate Social Responsibility Policy is also 2. Name and Designation of Mr. Sridhar S, Group posted on the website of the Company and can Compliance Officer Company Secretary, Legal be accessed at https://www.narayanahealth.org/ and Compliance Officer stakeholder-relations/company-policies. 3. No. of shareholder’ 12 complaints received as on b. Risk Management Committee st 31 March 2018 In terms of Regulation 21 of SEBI (Listing Obligations 4. No. of complaints not 0 and Disclosure Requirements) Regulations, 2015, solved to the satisfaction of the top 500 listed entities, are required to constitute shareholders as on a Risk Management Committee. The responsibilities 31st March 2018 related to the Risk Management Committee are 5. No. of pending complaints 0 being performed by our Audit, Risk and Compliance as on 31st March 2018 Committee. 8. Other Committees In addition to the scope and function of the Audit, a. Corporate Social Responsibility Committee Risk and Compliance Committee of the Company The members of the Corporate Social Responsibility as referred above, the scope of the Committee is Committee are: also to assist the Board in fulfilling its responsibilities Director Nature of Designation about the identification, evaluation and mitigation of Directorship operational, strategic and environmental risks. The Committee has the overall responsibility of monitoring 1. Mr. Dinesh Independent Chairman and approving the risk policies and associated Krishna Director practices of the Company. It is also responsible for Swamy reviewing and approving risk disclosure statements in 2. Mr. B. N. Independent Member public documents or disclosures. Subramanya Director 3. Dr. Ashutosh Vice Chairman, Member The Risk Management Policy is also posted on the Raghuvanshi Group CEO & website of the Company and can be accessed at Managing Director https://www.narayanahealth.org/stakeholder-relations/ company-policies. 72 Narayana Hrudayalaya Limited 9. Remuneration to Directors a. Remuneration to Directors for the Financial Year 2017- 2018 (In `) Director All elements of remuneration packages of the Directors Total Salary and Contribution to PF Other benefits Performance allowances and other funds # and perquisites related pay** Dr. Devi Prasad Shetty, 4,47,60,404 0 39,600 77,19,360 5,25,19,364 Chairman & Whole-time Director Dr. Ashutosh Raghuvanshi, 2,81,92,393 14,17,440 39,83,499 54,32,794 3,90,26,126 Vice Chairman, Group CEO & Managing Director Mr. Viren Shetty, 87,99,996 0 0 17,54,404 1,05,54,400 Whole-time Director ** Performance related pay pertains to the financial year 2016-17 # Towards National Pension Scheme contribution b. Remuneration to Non-Executive, Independent Directors paid as on 31st March 2018 (In `) Director All elements of remuneration packages of the Directors Total Sitting fees Sitting fees Commission* Other (Board) (Committees) benefits, if any Mr. Arun Seth 2,00,000 - 10,00,000 - 12,00,000 Ms. Kiran Mazumdar Shaw 2,50,000 100,000 10,00,000 - 13,50,000 Mr. B N Subramanya 3,50,000 4,50,000 10,00,000 - 18,00,000 Mr. Manohar D Chatlani 2,50,000 - 10,00,000 - 12,50,000 Mr. Muthuraman 3,00,000 3,50,000 10,00,000 - 16,50,000 Balasubramanian Mr. Dinesh Krishna Swamy 3,50,000 3,50,000 10,00,000 - 17,00,000 The remuneration of Non-Executive Directors d. Criteria for making payment to Non- comprises of sitting fees of ` 50,000/- per Board Executive Directors Meeting and ` 25,000/- per Committee Meeting in The criteria of making payment to the Non-Executive accordance with the provisions of Companies Act, directors is based on the varied roles played by 2013. Also, reimbursement of expenses incurred them towards the Company. It is not just restricted to by the Non-Executive Directors in connection with Corporate Governance or outlook of the Company, attending the Board Meetings, Committee Meetings, but they also bring along with them significant General Meetings and in relation to the business of the professional expertise and rich experience across the Company are extended to the Non-Executive Directors. wide spectrum of functional areas such as technology, *Commission paid of ` 10 Lakhs pertains to the financial year 2016-17. corporate strategy, finance and other corporate functions. The Company seeks their expert advice c Service Contracts Notice and Severance on various matters in general management, strategy, Fees business planning, finance, science, technology and As at 31st March 2018, the Board comprised of 9 intellectual property. members including 3 Executive Directors and 6 Non-Executive Directors of which 5 Directors are e. Disclosure of relationships between Directors Independent Directors. The Executive Directors are inter-se the employees of the Company and are subject to There is no inter-se relationship between any Directors service conditions as per the Company’s Policy. There except Dr. Devi Prasad Shetty, Chairman & Whole- is no separate provision for payment of severance time Director and Mr. Viren Shetty, Whole-time Director fees. However, Independent Directors are subject of the Company. to a notice period of 30 days but are not eligible for severance fee. Annual Report 2017-18 73 Company Overview Statutory Reports Financial Statements f. Number of shares and convertible instruments held by Non-Executive Directors Ms. Kiran Mazumdar Shaw holds 4705671 equity shares of ` 10 each as on 31st March 2018. The Company has not issued any convertible instruments. 10. general Body Meetings a. Details of location and time, where last three Annual General Meetings were held: Financial year ended Day, Date and Time of Annual General Location Meeting 3rd August 2017 Thursday, 3rd August 2017 at 11.30 AM “Sathya Sai Samskruta Sadanam”, No. 20, Hosur Road, Bengaluru – 560029 31st March 2016 Friday, 29th July 2016 at 10.30 AM “White Feather”, No. 40/41-1, Hobli-Begur, Opposite to Metro Whole-sale and PES College, NICE Tollgate, Electronic City, Phase - I, Hosur Main Road, Bengaluru-560100. 31st March 2015 Saturday, 8th August 2015 at 11.30 AM No. 258/A, Bommasandra Industrial Area, Hosur Road, Bengaluru – 560099. b. Details of Special Resolutions passed in the previous three Annual General Meetings Annual General Meeting Annual General Meeting Annual General Meeting held on 3rd August 2017 held on 29th July 2016 held on 8th August 2015 1. Alteration of Articles of Association 1. Increase in the limits for borrowings 1. Appointment of Mr. David Michael with respect to removal of common under section 180(1)(c) of the Easton as Director. seal clause. Companies Act, 2013 upto ` 1,000 Crores. 2. Appointment of Dr. Anesh Shetty 2. Conversion of Private Company for office or place of profit in an into a Public Company. Associate Company. 3. Amendment in the Liability Clause 3. Adoption of revised Articles of of the Memorandum of Association Association of the Company. of the Company. 4. Alteration of Articles of Association - of the Company. 11. Details of Postal Ballots S. No 11th August 2017 1. Increase in the limits for providing Loans, Guarantee, Security and making Investments under Section 186 of the Companies Act, 2013 2. Scrutinizer for Postal Ballot Mr. Sudhindra KS CP No: 8190 FCS No: 7909 M/s S. Kedarnath and Associates Company Secretaries, No. 85, Ojus Apartments, 004, Ground Floor, 04th Main, 13th Cross, Malleswaram Bengaluru- 560003. 3. Voting Pattern As per Annexure A of this Corporate Governance Report. 74 Narayana Hrudayalaya Limited 12. Details of Special Resolution proposed b. financial Year: to be conducted through Postal Financial Year covers the period from 1st April 2017 to Ballot at the ensuing Annual General 31st March 2018. Meeting Pursuant to the Companies (Amendment) Act, 2017, any c. Listing on Stock Exchanges item of business required to be transacted by means of Equity Shares of the Company are listed on the BSE postal ballot, may be transacted at a general meeting Limited (BSE Limited), Department of Corporate by a company which is required to provide the facility to Services, Phiroze Jeejeebhoy Towers, Dalal Street, Members to vote by electronic means under Section 108, Mumbai – 400 001 and National Stock Exchange of in the manner provided in that Section. The Company India Limited (NSE), Exchange plaza, Bandra Kurla therefore, shall be transacting the businesses in the Complex, Mumbai – 400 050. The requisite listing fees ensuing Annual General Meeting by electronic means. have been paid in full to the Stock Exchanges where the Company’s Shares are listed. Remote e-voting and insta poll voting at the Annual General Meeting. d. Stock Exchange Codes To allow the Members to vote on the resolutions proposed NSE: NH and BSE: 539551 at the Annual General Meeting, the Company has arranged for a remote e-voting facility. The Company has engaged e. Demat International Security Identification Karvy Computershare Pvt. Ltd. to provide e-voting facility Number (ISIN) in NSDL and CDSL for Equity to all the Members. Members whose names appear on the Shares register of Members as on 27th July 2018 shall be eligible ISIN: INE410PO1011 to participate in the e-voting. The facility for voting through insta poll will also be made available at the Annual General f. Suspension of Trading Meeting, and the Members who have not already cast None of the securities of the Company were their vote by remote e-voting can exercise their vote at the suspended from trading on stock exchanges during Annual General Meeting. the year under review. 13. Means of Communication g. Registrar and Share Transfer Agents a. financial results Karvy Computershare Private Limited situated at The quarterly, half yearly and yearly financial results Karvy Selenium Tower B, Plot No. 31 & 32, Gachibowli, are sent to the Stock Exchanges immediately after the Financial District, Nanakramguda, Hyderabad - Board approves the same. These results are published 500032, Telangana in newspapers like Financial Express (English) and Vijaya Vani (Kannada). h. Share Transfer System Trading in equity shares of the Company through B. The results along with investor presentations and press recognized Stock Exchanges is permitted only in release are also posted on the website of BSE Limited dematerialized form. Shares sent for transfer in physical and National Stock Exchange of India Limited, and on form are registered and returned within a period of 30 Company’s website i.e., https://www.narayanahealth. days from the date of receipt of documents, provided org/stakeholder-relations/investor-presentations. the documents are complete and valid in all respects. 14. general Shareholder Information a. Annual General Meeting Venue “Sathya Sai Samskruta Sadanam”, No. 20, Hosur Road, Bengaluru – 560029. Day, date and time Friday, 3rd August 2018 at 11.30 A.M. Annual Report 2017-18 75 Company Overview Statutory Reports Financial Statements i. Distribution of shareholdings as on 31st March 2018 NARAYANA HRUDAYALAYA LIMITED Distribution Schedule as on 31st March 2018 (Total) S. No Category No. of Cases % of Cases Amount % of Amount 1. 1 - 5000 32186 93.25 28281020.00 1.38 2. 5001 - 10000 1376 3.99 9808210.00 0.48 3. 10001 - 20000 519 1.50 7350520.00 0.36 4. 20001 - 30000 131 0.38 3232530.00 0.16 5. 30001 - 40000 69 0.20 2428880.00 0.12 6. 40001 - 50000 48 0.14 2223140.00 0.11 7. 50001 - 100000 63 0.18 4581740.00 0.22 8. 100001 & Above 123 0.36 1985702000.00 97.17 Total 34515 100.00 2043608040.00 100.00 j. Category of Equity Shareholders as on 31st March 2018 Consolidated Shareholding Pattern As on 31st March 2018 Category No. of Holders Total Shares % to Equity Promoter individuals 2 1267,83,666 62.039131 Foreign portfolio investors 60 195,29,234 9.556252 Resident individuals 31,962 123,82,683 6.059226 Foreign bodies corporates 1 117,65,046 5.756997 Foreign venture capital 2 106,21,978 5.197659 Mutual funds 16 87,95,349 4.303834 Bodies corporates 387 77,94,966 3.814316 Promoters bodies corporate 1 37,02,064 1.811533 Trusts 1 19,53,533 0.955924 Non-resident indians 749 2,93,303 0.143522 Banks 3 2,37,900 0.116412 Non-resident indian non repatriable 285 2,31,493 0.113277 H U F 1,001 2,08,612 0.102080 Clearing members 47 53,034 0.025951 Nbfc 3 5,969 0.002921 Indian financial institutions 1 1,956 0.000957 Foreign nationals 1 18 0.000009 Total 34,522 2043,60,804 100 k. Dematerialization of Shares & Liquidity As on 31st March 2018, except one resident individual holding 1 (one) share in physical form, the entire Paid-up Equity Share Capital of the Company is held in dematerialized form with National Securities Depository Limited and Central Depository Services (India) Limited. l. Outstanding ADRs/GDRs Warrants or any Convertible Instruments, conversion date and likely impact on Equity The Company had not issued any ADRs/GDRs Warrants or any Convertible Instruments during the year under review. m. Address for correspondence Mr. Sridhar S, Group Company Secretary, Legal and Compliance Officer. Narayana Hrudayalaya Limited, Corporate Office, 2nd Floor, 261/A, Bommasandra Industrial Area, Anekal Taluk, Bengaluru – 560099. 76 Narayana Hrudayalaya Limited n. Performance in comparison to broad-based indices i. BSE: ii. NSE: Performance of Company’s Shares vs. BSE Sensex Performance of Company’s Shares vs. NSE Nifty Month end closing Sensex and Share price Month end closing Nifty and Share Price 40000 340 340 11500 35000 330 330 11000 320 320 30000 11500 310 310 25000 300 300 10000 20000 290 290 9500 15000 280 280 9000 10000 270 270 5000 260 260 8500 0 250 250 8000 31-Jul-17 31-Jul-17 28-Apr-1731-May-1730-Jun-17 31-Aug-1729-Sep-1731-Oct-1730-Nov-1729-Dec-1731-Jan-1828-Feb-1828-Mar-18 28-Apr-1731-May-1730-Jun-17 31-Aug-1729-Sep-1731-Oct-1730-Nov-1729-Dec-1731-Jan-1828-Feb-1828-Mar-18 BSE Sensex Price NSE Nifty Price o. unit Locations In view of the nature of the Company’s business viz. Healthcare and allied activities, the Company operates from various facilities in India and abroad. The first facility was established in Bengaluru with approximately 225 operational beds and since then the company has grown to 25 hospitals, 7 heart centres and a network of primary care facilities across India and an international hospital in the Cayman Islands. p. Market price data -- Monthly High/Low and Volumes: Month National Stock Exchange Bombay Stock Exchange High Low Total Traded High Low Total Traded (`) (`) Quantity (`) (`) Quantity April 2017 335.70 311.10 12,48,692 334.50 311.00 6,11,500 May 2017 336.00 290.15 23,15,189 333.45 290.50 1,38,842 June 2017 345.00 299.55 33,40,003 343.50 300.00 12,74,676 July 2017 320.15 286.10 59,31,773 321.95 286.80 21,68,823 August 2017 311.00 286.10 21,32,431 312.00 281.50 92,233 September 2017 304.90 291.20 22,89,228 304.95 285.00 4,84,021 October 2017 310.50 297.10 6,46,517 310.00 292.80 71,922 November 2017 309.90 290.00 10,31,713 308.10 290.35 65,940 December 2017 302.00 281.45 18,68,358 308.00 280.70 70,282 January 2018 301.00 285.00 13,78,016 305.00 285.25 1,43,674 February 2018 320.90 284.00 42,70,304 320.50 284.00 12,93,048 March 2018 303.70 277.10 20,22,355 306.35 278 66,647 Annual Report 2017-18 77 Company Overview Statutory Reports Financial Statements 15. Disclosures Policy is also posted on the website of the Company a. Related Party transactions and can be accessed at https://www.narayanahealth. During 2017-18, there were no materially significant org/stakeholder-relations/company-policies. transactions entered into between the Company and its Promoters, Directors or the Management, Holding d. Compliance with mandatory requirements Company, Subsidiaries, Associates or relatives that The Company has complied with all mandatory may have potential conflict with the interest of the requirements to the extent applicable to the Company. Company at large except for those mentioned in the Directors’ Report. Further, details of related party e. Link for policy on determining Material transactions form part of notes to the standalone Subsidiaries accounts of the Annual Report and a policy about The Company has a Policy for determining material same is available on the Company’s website i.e., subsidiaries which is disclosed on website and can https://www.narayanahealth.org/stakeholder-relations/ be accessed at https://www.narayanahealth.org/ company-policies. stakeholder-relations/company-policies. b. Details of Non-compliance with respect to . f Disclosure of commodity price risk and Capital Markets commodity hedging activities The Company has complied with all the requirements Disclosure pertaining to commodity price risk and of regulatory authorities with respect to capital commodities hedging activities are not applicable to markets. There were no instances of non-compliances the Company. by the Company and no penalties or strictures were g. Disclosures regarding appointment or re- imposed on the Company by the Stock Exchanges or appointment of Directors SEBI or any statutory authority, on any matter related As per the Companies Act, 2013, at least two thirds of to the capital markets during the year under review. the Board should consist of retiring Directors, of these at least one third are required to retire every year. c. whistle Blower Policy/Vigil Mechanism The Company has developed a Whistle Blower Policy Mr. Viren Shetty, Whole-time Director of the Company, with a view to provide a mechanism for Directors, being the longest in the office, retires by rotation at employees and stakeholders of the Company to the forthcoming Annual General Meeting and being report their genuine concern. The Whistle Blower eligible offers himself for re-appointment. The following Directors whose term of appointment is coming to an end are proposed to be re-appointment at the ensuing Annual General Meeting. S. Name Designation No. 1. Dr. Devi Prasad Shetty Chairman & Whole-time Director 2. Dr. Ashutosh Raghuvanshi Vice-Chairman, Group CEO & Managing Director 3. Mr. Viren Shetty Whole-time Director 4. Mr. Dinesh Krishna Swamy Independent Director 5. Mr. Muthuraman Balasubramanian Independent Director 6. Mr. B. N. Subramanya Independent Director 7. Mr. Arun Seth Independent Director 8. Mr. Manohar D Chatlani Independent Director The detailed profile of the above Directors is provided as part of the Notice of the Annual General Meeting of the Company. h. Code for Prevention of Insider Trading Practices During the year under review, the Company adhered to comprehensive Code of Conduct for prevention of Insider Trading for its Directors’ and designated employees. This Code lays down guidelines, through which it advises the designated Employees and Directors on procedures to be followed and disclosures to be made, while dealing with shares of the Company. 78 Narayana Hrudayalaya Limited The Insider trading Policy is also posted on the The auditors’ report on statutory financial statements website of the Company and can be accessed at of the Company are unqualified. www.narayanahealth.org. The Company has complied with the requirement of i. Subsidiary Companies having separate persons to the post of Chairman and All subsidiary companies are managed by their Boards Managing Director / Chief Executive Officer. having the rights and obligations to manage such Also, Ernst & Young LLP, the internal auditors of the Companies in the best interest of their stakeholders. Company, make presentations to the audit committee As on 31st March 2018 NCHL is a material unlisted on their reports. subsidiary. The Company monitors performance of subsidiary 16. CEO and CFO Certification companies, inter-alia, by reviewing financial statements The Managing Director & Chief Executive Officer (“MD & in particular investments (wherever applicable) made CEO”) and the Chief Financial Officer (CFO) of the Company by unlisted subsidiary companies. have given annual certification on financial reporting and internal controls to the Board in terms of Regulation 17(8) j. Accounting Treatment in Preparation of of SEBI (Listing Obligations and Disclosure Requirements) Financial Statements Regulations, 2015. The MD & CEO and CFO have also In the preparation of the financial statements, the given quarterly certification on financial results while Company has followed existing Indian Accounting placing the financial results before the Board in terms of Standards (Ind AS). The significant accounting policies Regulation 33 of SEBI (Listing Obligations and Disclosure which are consistently applied have been set out in the Requirements) Regulations, 2015. The annual certificate notes to the financial statements. given by the MD & CEO and the CFO is published in this Report as Annexure–VIIB of Directors’ Report. k. Details of Unclaimed Shares/Dividends The Company has not declared / paid any dividends, 17. Compliance Certificate on Corporate hence the question of unclaimed shares/dividend Governance does not arise. Certificate received from M/s. Ganapathi & Mohan, Practicing Company Secretaries, having their office at No. l. Compliance with SEBI (Listing Obligations 31, Vidya Bhavan, 3rd Floor, West Anjaneya Temple Street, and Disclosure Requirements) Regulations, Basavanagudi, Bengaluru – 560 004 (firm Registration 2015 No. P2002KR057100), confirming compliance with the The Company has complied with all the mandatory conditions of Corporate Governance as stipulated under provisions of the SEBI (Listing Obligations and Regulation 34 (3) and Regulation 53(f) read with Schedule Disclosure Requirements) Regulations, 2015. V (E) of the SEBI (Listing Obligations and Disclosure Requirements)Regulations, 2015 is annexed to this report m. Discretionary requirements (Schedule II as Annexure VIIA Part E of the SEBI Listing Regulations) A message from Dr. Ashutosh Raghuvanshi, For and on behalf of the Board Vice Chairman, Group CEO & Managing Director Narayana Hrudayalaya Limited, on the half-yearly Dr. Ashutosh Raghuvanshi Mr. Viren Shetty financial performance of the Company including a Vice Chairman, Group CEO & Whole-time Director summary of the financial highlights in the six month Managing Director DIN: 02144586 period ended 30th September 2017 was uploaded in DIN: 02775637 Stock Exchange and also hosted in the website of the Place: Bengaluru company at www.narayanahealth.org. Date: 29th May 2018 Annual Report 2017-18 79 Company Overview Statutory Reports Financial Statements Annexure A Voting Pattern for resolutions passed by postal ballot on 11th August 2017 Resolution - Special Resolution: Increase in the limits for providing Loans, Guarantee, Security and making Investment under section 186 of the Companies Act, 2013 Mode of Voting No. of Votes No. of votes No. of votes No. of Invalid % of total % of total votes Polled in Favour Against Votes votes cast in cast against favour of the the resolution resolution E-Voting 15,58,22,508 14,71,62,164 86,60,175 169 94.44 5.56 Postal ballot 507 475 2 30 0 0 Total 15,58,23,015 14,71,62,639 86,60,177 199 94.44 5.56 80 Narayana Hrudayalaya Limited Annexure VIIA Report on Corporate Governance by Company Secretary in Practice To The Members, M/s. NARAYANA HRUDAYALAYA LIMITED CIN: L85110KA2000PLC027497 No. 258/A, Bommasandra Industrial Area, Anekal Taluk Bengaluru - 560099 We have examined the compliance of conditions of Corporate Governance by Narayana Hrudayalaya Limited (‘the Company’) for the year ended 31st March 2018 as stipulated under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 as amended from time to time. The compliance of conditions of Corporate Governance is the responsibility of the Management. Our examination was limited to procedures and implementation process thereof, adopted by the Company for ensuring the compliance with the conditions of Corporate Governance as stipulated in the said clause. In our opinion and to the best of our information and according to the explanations given to us, and based on the representations of the Management, we certify that the Company has complied with the conditions of Corporate Governance as specified in Regulations 17 to 27, clauses (b) to (i) of sub-regulation (2) of Regulation 46 and paragraphs C, D and E of Schedule V of the Listing Regulations, as applicable. We state that such compliance is neither an assurance as to the future viability of the Company nor as to the efficiency or effectiveness with which the Management has conducted the affairs of the Company. For Ganapathi & Mohan Company Secretaries CS. G M Ganapathi Partner Place: Bengaluru FCS. 5659; C.P: 4520 Date: 29th May 2018 (FRN: P2002KR057100) Annual Report 2017-18 81 Company Overview Statutory Reports Financial Statements Annexure VIIB CEO and CFO CERTIFICATION As per Regulation 17(8) of the Sebi (Listing Obligations and Disclosure Requirements) Regulations, 2015 To The Board of Directors Narayana Hrudayalaya Limited (Formerly known as Narayana Hrudayalaya Private Limited) No. 258/A, Bommasandra Industrial Area, Anekal Taluk, Bengaluru - 560099 Dear Sir, We, Dr. Ashutosh Raghuvanshi, Vice Chairman, Group CEO & Managing Director and Mr. Venugopalan Kesavan, Chief Financial Officer, certify to the Board that: A. We have reviewed Financial Statements and Cash Flow Statements for the year ended 31st March 2018 and that to the best of our knowledge and belief: i. These statements do not contain any materially untrue statement or omit any material fact or contain statements that might be misleading; ii. These statements together present a true and fair view of the Company’s affairs and are in compliance with existing Accounting Standards, applicable laws and regulations. B. There are, to the best of our knowledge and belief, no transactions entered into by the Company during the financial year under review which are fraudulent, illegal or violative of the Company’s Code of Conduct. C. We accept responsibility for establishing and maintaining internal controls for financial reporting and that we have evaluated the effectiveness of internal control systems of the Company pertaining to financial reporting and we have disclosed to the auditors and the Audit Committee, deficiencies in the design or operation of such internal controls, if any, of which we are aware and the steps we have taken or propose to take to rectify these deficiencies. D. We have indicated to the auditors and the Audit Committee: i. Significant changes, if any, in internal control over financial reporting during the year; ii. Significant changes, if any, in Accounting Policies during the year and that the same have been disclosed in the notes to the financial statements; and iii. There are no instances of significant fraud of which we have become aware and the involvement therein, if any, of the management or an employee having a significant role in the Company’s internal control system over financial reporting. Dr. Ashutosh Raghuvanshi Mr. Venugopalan Kesavan Vice Chairman, Group CEO & Managing Director Chief Financial Officer DIN: 02775637 PAN: AEMPK0751N Place: Bengaluru Date: 29th May 2018 82 Narayana Hrudayalaya Limited Annexure VIII BUSINESS RESPONSIBILITY REPORT [As per Regulation 34(2)(f) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015] Section A: General Information about the Dharwad, Guwahati, Jaipur, Jamshedpur, Katra, Kolar, Company Kolkata, Raipur, Shimoga, Bellary, Palanpur, Durgapur, 1. Corporate Identity Number (CIN) of the Company: Delhi, Gurugram. L85110KA2000PLC027497. International: Cayman Islands. 2. Name of the Company: Narayana Hrudayalaya Limited. Section B: Financial Details of the Company 3. Registered address: No. 258/A, Bommasandra Industrial 1. Paid up Capital (INR): ` 2,043.61 Million Area, Anekal Taluk, Bengaluru - 560099. 2. Total Turnover (INR): ` 18,475.75 Million 4. Website: www.narayanahealth.org 3. Total Profit After Taxes (INR): ` 584.22 Million 4. Total Spending on Corporate Social Responsibility (CSR) 5. E-mail id: [email protected] as percentage of Profit After Tax (%): 6. Financial Year reported: 2017-18. ` 22.82 Million spent on CSR which is 3.91% of the profit for Financial Year 2017-18. However, the prescribed minimum 7. Sector(s) that the Company is engaged in (Industrial activity amount to be spent on CSR as per Section 135 of the code-wise): The Company is in the healthcare sector, running, Companies Act, 2013 read with the Companies (Corporate operating and maintaining multi-specialty hospitals and heart Social Responsibility Policy) Rules, 2014 is 2% of the average care centres and applicable NIC Code: 8610. net profit of the previous three years (Financial Year 2014-15 to 2016 - 17) which amounts to ` 19.36 Million. 8. List three key products/services that the Company manufactures/provides (as in balance sheet): 5. List of activities in which expenditure in 4 above has been incurred:- The Company provides only Healthcare Services. S. CSR Activities Amount spent 9. Total number of locations where business activity is no. (` in mn) undertaken by the Company 1. Rajiv Gandhi Arogya Yojana (RAY) 1.75 a. Number of International Locations (Provide details of 2. Railway Clinics 0.60 major 5). 3. Mobile Mammography Screening 2.84 4. Care Companion Program 0.67 The Company has one hospital in the Grand Cayman Islands. 5. Udaan – A Scholarship 0.52 Programme b. Number of National Locations- 6. E-Health Center 6.17 7. Shorapur MOM Program 2.29 The Company and its group has 21 owned/operated 8. Non-Communicable disease 4.71 hospitals, 3 managed hospitals, 7 heart centers and 9. Community Radio 0.04 19 clinics 10. Administration 3.23 10. Markets served by the Company – Local/State/National/ Total 22.82 International. Section C: Other Details National Presence: 1. Does the Company have any Subsidiary Company/ Companies? The company has its hospitals and clinics in many cities including Ahmedabad, Bangalore, Mysore, Davangere, Yes, the Company has totally nine Subsidiaries excluding Annual Report 2017-18 83 Company Overview Statutory Reports Financial Statements NewRise Healthcare Private Limited which was merged with 3. Do any other entity/entities (e.g. suppliers, distributors etc.) Narayana Hrudayalaya Limited vide Regional Director’s that the Company does business with, participate in the Order dated 4th October 2017 and Narayana Hrudayalaya BR initiatives of the Company? If yes, then indicate the Hospitals Malaysia Sdn Bhd (Narayana Malaysia) which percentage of such entity/entities? [Less than 30%, 30- stands dissolved on 27th March 2018. 60%, More than 60%]: a. Narayana Hospitals Private Limited (India) The Company does not mandate its suppliers/distributors b. Narayana Institute for Advanced Research Private to participate in the Company’s BR initiatives. However, Limited (India) they are encouraged to adopt such practices and follow the concept of being responsible business. c. Narayana Health Institutions Private Limited (India) d. Narayana Hrudayalaya Surgical Hospital Private Section D: BR Information Limited (India) 1. Details of Director/Directors responsible for BR e. Meridian Medical Research and Hospital Limited (India) (a) Details of the Director/Director responsible for f. Narayana Vaishno Devi Specialty Hospitals Private implementation of the BR policy/policies: Limited (India) Name DIN Designation g. Narayana Cayman Holdings Limited (Cayman) Dr. Ashutosh 02775637 Vice Chairman, h. Narayana Holdings Private Limited (Mauritius) and Raghuvanshi Group CEO & i. Health City Cayman Islands Limited Managing Director 2. Do the Subsidiary Company/Companies participate in the (b) Details of the BR head: BR Initiatives of the Parent Company? If yes, then indicate No. Particulars Details the number of such subsidiary company(s)? 1 DIN Number 02775637 Certain business responsibility initiatives in the area of (if applicable) ethics, transparency and accountability, sustainable use of 2 Name Dr. Ashutosh resources, wellbeing of employees is being implemented Raghuvanshi by three operating subsidiaries- 3 Designation- Vice Chairman, Group a. Narayana Hrudayalaya Surgical Hospital Private CEO & Managing Limited (India) Director 4 Telephone number 08071222129 b. Meridian Medical Research and Hospital Limited (India) 5 e-mail id investorrelations@ c. Narayana Vaishno Devi Specialty Hospitals Private narayanahealth.org Limited (India) 2. Principle-wise (as per NVGs) BR Policy/Policies: (a) Details of compliance (Reply in Y/N) S. Questions P1 P2 P3 P4 P5 P6 P7 P8 P9 No. 1 Do you have policy/ policies for 2 Has the policy being formulated in consultation with the relevant stakeholders? 3 Does the policy conform to any national / international standards? If yes, specify? (50 words) 4 Has the policy being approved by the Board? Is yes, has it been signed by MD/ Owner/ CEO/ appropriate Board Director? 5 Does the company have a specified committee X X of the Board/ Director/ Official to oversee the implementation of the policy? 84 Narayana Hrudayalaya Limited S. Questions P1 P2 P3 P4 P5 P6 P7 P8 P9 No. 6 Indicate the link for the policy to be viewed online? Note Note Note Note Note Note Note Note Note 1 2 3 4 5 6 7 8 9 7 Has the policy been formally communicated to all relevant internal and external stakeholders? 8 Does the Company have in-house structure to X implement the policy/ policies? 9 Does the Company have a grievance redressal X mechanism related to the policy/ policies to address stakeholders’ grievances related to the policy/ policies? 10 Has the Company carried out independent audit/ X X X X X X X X evaluation of the working of this policy by an internal or external agency? Note 1: http//www.narayanahealth.org/Stakeholder-relations/Codes, Policies, Terms, MOA & AOA/Anti-bribery policy.pdf. Note 2: http//www.narayanahealth.org/Stakeholder-relations/ Codes, Policies, Terms, MOA & AOA /ESG-Policy.pdf. Note 3: http//www.narayanahealth.org/Stakeholder-relations/ Codes, Policies, Terms, MOA & AOA /FAW-policy.pdf. Note 4: http//www.narayanahealth.org/Stakeholder-relations/ Codes, Policies, Terms, MOA & AOA /NHL-CSR- policy.pdf. Note 5: http//www.narayanahealth.org/Stakeholder-relations/ Codes, Policies, Terms, MOA & AOA /NHL-CSR- policy.pdf. Note 6: same as policy for Principle 2. Note 7: same as policy for Principle 2. Note 8: same as policy for Principle 4. Note 9: same as policy for Principle 2. (b) If answer to the question at serial number 1 against any principle, is ‘No’, please explain why: (Tick up to 2 options)- Not applicable S. Questions P1 P2 P3 P4 P5 P6 P7 P8 P9 No. 1 The Company has not understood the Principles. NA NA NA NA NA NA NA NA NA 2 The Company is not at a stage where it finds NA NA NA NA NA NA NA NA NA itself in a position to formulate and implement the policies on specified Principles. 3 The Company does not have financial or NA NA NA NA NA NA NA NA NA manpower resources available for the task. 4 It is planned to be done within next 6 months. NA NA NA NA NA NA NA NA NA 5 It is planned to be done within the next 1 year. NA NA NA NA NA NA NA NA NA 6 Any other reason (please specify). NA NA NA NA NA NA NA NA NA 3. Governance related to Business Responsibility BR: (b) Does the Company publish a BR or a Sustainability Report? What is the hyperlink for viewing this report? (a) Indicate the frequency with which the Board of How frequently it is published? Directors, Committee of the Board or CEO to assess the BR performance of the Company. Within 3 months, The company has qualified under clause (f) of 3-6 months, Annually, More than 1 year? sub regulation (2) of regulation 34 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, BR performance is reviewed as a part of the ongoing 2015 during Financial Year 2016-17 and hence this is business review by the Management and the Board of the second year of publishing this report. The Report Directors. for first Financial Year 2016-17 is hosted on our website Annual Report 2017-18 85 Company Overview Statutory Reports Financial Statements as a part of Annual Report 2016-17. The link for named National Mental Health Survey, it was reported that viewing the report is https://www.narayanahealth.org/ “India needs to talk about mental illness. Every sixth Indian stakeholder-relations/annual-reports. needs mental health help. Other than usual stigma of going to mental health doctors, there is a huge skill shortage of It is published annually as a part of Annual Report. trained psychiatrists in India. The shortage is more so in smaller towns. We have started a program in which Health Section E: Principle-wise Performance: City facility in Bengaluru provides Tele-psychiatry services Principle 1 to patients in Mysore and Shimoga. Many patients have 1. Does the policy relating to ethics, bribery and corruption already availed the service. We are planning to expand the cover only the company? Yes/ No. Does it extend to the service in other places also. Group/Joint Ventures/ Suppliers/Contractors/NGOs / Others? 2. For each such product, provide the following details in respect of resource use (energy, water, raw material etc.) This policy extends to the Company and all its subsidiaries. per unit of product(optional): 2. How many stakeholder complaints have been received (a) Reduction during sourcing/production/ distribution in the past financial year and what percentage was achieved since the previous year throughout the value satisfactorily resolved by the management? If so, provide chain? details thereof, in about 50 words or so. We have been able to reduce Nursing Man Days with The details with regard to Stakeholders’ Grievances are: the help of our care companion system. NIL (b) Reduction during usage by consumers (energy, water) Principle 2 has been achieved since the previous year? 1. List up to 3 of your products or services whose design has Care Companion has approximately reduced 0.3 to incorporated social or environmental concerns, risks and/ 0.7 days of patients stay in many of our hospitals, or opportunities. which translates to more than rupees one crore of savings for the patients. Care Companion: Care Companion is a program that was started by us in 3. Does the Company have procedures in place for our hospital in Mysore in 2013. From then, almost all of sustainable sourcing (including transportation)? our hospitals have adopted the program. It is carefully designed for patients and family to empower themselves (a) If yes, what percentage of your inputs was sourced with basic knowledges that is required to manage their sustainably? Also, provide details thereof, in about 50 health condition. Education is provided in almost all areas words or so. from Chronic diseases such as Diabetes, Hypertension to Acute condition such as post-surgery wound care. The The Company is in the business of providing program has achieved multiple objective by improving healthcare service in which the products and services quality of care, reducing inpatient readmission rate and as inputs are regulated by the statutes and hence we reducing post-surgery complications. These outcomes procure the products and services from empaneled have also reduced overall financial impact for the patients vendors who are governed by various statutes. due to health complications. In the last year, we conducted more than 25000+ sessions in which more than 50000+ In the recent procurement of high value utilities, the patients and their family benefitted. facility started adopting life cycle cost analysis to identify a sustainable product with lesser energy foot Tele Psychiatry: print. This procedure ensures that energy efficiency, resource consumption to an optimum level, while Narayana Health was the first organization to launch Tele meeting the requirement. Health in largest scale in this country. Over the years, we have included many form of virtual service delivery such 4. Has the Company taken any steps to procure goods as Tele-OPD or Tele-Consultation, Tele-Radiology etc. In and services from local & small producers, including the last year, mental health received public and media communities surrounding their place of work? attention in an unprecedented manner. In report in 2015-16 86 Narayana Hrudayalaya Limited (a) If yes, what steps have been taken to improve their 5. Do you have an employee association that is recognized by capacity and capability of local and small vendors? management? No The Company is in the business of providing 6. What percentage of your permanent employees is members healthcare service in which the products and services of this recognized employee association? Not Applicable as inputs are regulated by the statutes and hence we procure the products and services from empaneled 7. Please indicate the Number of complaints relating to child vendors who are governed by various statutes. labour, forced labour, involuntary labour, sexual harassment in the last financial year and pending, as on the end of the 5. Does the Company have a mechanism to recycle products financial year. and waste? If yes what is the percentage of recycling of products and waste (separately as <5%, 5-10%, >10%). No Category No of No of Also, provide details thereof, in about 50 words or so. complaints complaints filed during pending as The Company is engaged in providing healthcare services. the financial on end of the In the process of providing the healthcare services, year financial year the Company adopts various sustainable initiatives as 1 Child labour/ Zero Zero mentioned below: forced labour/ involuntary a. As part of water conservation initiatives, domestic labour waste water from hospitals are treated in on-site waste 2 Sexual Three Nil water treatment plants and reused in the hospitals harassment for suitable non-contact purposes like flushing, 3 Discriminatory Zero Zero gardening, etc. employment b. Based on water quality of Reverse Osmosis reject 8. What percentage of under mentioned employees were water, the water is segregated separately and reused given safety & skill up- gradation training in the last year? at suitable locations. By above means more than 40- 50% of the treated waste water is recycled in various (a) Permanent Employees: 48.5% (5205 of 10737) process. (b) Permanent Women Employees: 52.1% (3524 of 6759) c. Recyclable wastes like paper and non-contaminated plastics were collected and disposed through (c) Casual/Temporary/Contractual Employees: 100% authorized recyclers. By above means >15% of (3536 of 3536) – As per the contract between NH & general wastes are recycled through authorized Vendor, this is to be managed by the vendor. vendors. (d) Employees with Disabilities: 54.5% (6 of 11) d. E-wastes, lead wastes and metal scraps generated at the facility were disposed through authorized Principle 4 recyclers/dismantlers. Entire quantity of e-wastes and 1. Has the company mapped its internal and external lead wastes generated are handed over to authorized stakeholders? recyclers. Yes, the Company has mapped its internal and external Principle 3 stakeholders 1. Please indicate the total number of employees: 10,737 2. Out of the above, has the Company identified the 2. Please indicate the total number of employees hired on disadvantaged, vulnerable & marginalized stakeholders temporary/contractual/casual basis: 3,536 It has been the continued effort of the CSR team to 3. Please indicate the number of permanent women identify vulnerable and marginalized populations. Before employees: 6,759 initiating programs, we conduct baseline surveys wherein we understand demographics, socio-economic profile as 4. Please indicate the number of permanent employees with well as healthcare indices. This helps us address gaps in disabilities: 11 services for identified populations. Annual Report 2017-18 87 Company Overview Statutory Reports Financial Statements 3. Are there any special initiatives taken by the company University. With additional support from Jain University, to engage with the disadvantaged, vulnerable and the students have been coached, mentored and would be marginalized stakeholders. If so, provide details thereof, in appearing for medical selection test in current year. The about 50 words or so. Udaan Bidar program was initiated with Shaheen group of Institutions in Bidar wherein 20 pre-university students have Care Companion Program been selected and provided full scholarship. The Udaan The Care Companion Program (CC Program) was first set students are regularly motivated and mentored by panel of up in 2013 in our hospital in Mysore. The program was doctors from the Group. started in direct response to the needs of patients and to recognize patient family members as an untapped existing e - Health Centre Program resource. This program is designed to educate patient The program focuses on delivering quality and affordable family members with low or no prior medical knowledge for primary health care to people living in resource-deprived attending to the needs of patients. The program undertakes locations of India using appropriate technologies. The in-hospital education-cum-training program for patients’ Company is the healthcare partner to implement, operate family members. Multi-lingual group teaching sessions use and manage eHealth Centres. The Centres are rapidly interactive videos for identifying warning signs of illness, deployable healthcare facilities powered by cloud- checking temperature, pulse, blood pressure, timely enabled solutions and fully equipped with workstations, medications etc. These sessions are conducted in Hindi, open electronic records (EMR) systems, biometric patient Tamil, English, Telugu, Bengali, Assamese and Kannada. identification and integrated diagnostic services. The program has been implemented across 24 facilities of the Company, wherein the program was introduced in Principle 5 five facilities in the last financial year. Since its inception 1. Does the policy of the Company on human rights cover in 2013, more than 80,000 families have been educated, only the Company or extend to the Group/Joint Ventures/ with 45,000 families who were trained in the last financial Suppliers/Contractors/NGOs/Others? year. As per an impact study conducted across five units to assess caregiver competencies and perception, 82% of Applies to Company and its Subsidiaries and it also the care givers stated that they have learnt to deal with the extends to the employees/ workers hired from outsourced medical situation while 87% stated that they felt confident agencies. of handling patient care requirements after attending the program. 2. How many Stakeholder complaints have been received in the past financial year and what percent was satisfactorily Udaan resolved by the management? India has a large shortfall of doctors. According to the NIL World Health Organization, India has seven doctors for every 10,000 people, half the global average. These Principle 6 shortages exist despite India having one of the largest 1. Does the policy related to Principle 6 cover only the medical education systems in the world. The unwillingness company or extends to the Group/Joint Ventures/Suppliers/ of doctors to work in rural areas is another challenge. Contractors/NGOs/others Considering these twin challenges, the objective of the program has been to nurture the potential of rural students The Environment Social Governance (ESG) Policy of the from disadvantaged backgrounds and create a platform Company covers the Company and all its subsidiaries. which they could leverage on towards realizing medical education. Students from our Udaan program can be 2. Does the Company have strategies/ initiatives to address motivated to use their medical education in improving global environmental issues such as climate change, health care systems in their villages and small towns. It global warming, etc? Y/N. If yes, please give hyperlink for is hoped that these enabled students would fulfil their webpage etc. dreams of becoming able physicians, have a multiplier effect among students and practice ethical healthcare Yes, as part of the strategy, Company has adopted thereby serving the larger community. In collaboration with environment initiatives like resource conservation audits, Mindtree, 56 high-school students had been identified for sourcing energy from renewable sources and energy the program of which 26 students progressed to join Jain conservation projects to combat the effects of Climate Change, Global Warming, etc. 88 Narayana Hrudayalaya Limited 3. Does the company identify and assess potential g. Through continuous monitoring, control and various environmental risks? Y/N water conservation initiatives, facilities specific water consumption reduced by 10% compared to 2016-17. Yes. To further emphasize the need for water conservation, a company-wide awareness campaigns were 4. Does the company have any project related to Clean organized like Report a Water leak campaign on the Development Mechanism? If so, provide details thereof, eve of ‘World Water Day’ and regular distribution of in about 50 words or so. Also, if Yes, whether any awareness posters to sensitize the work force. environmental compliance report is filed? Benefits from the above initiatives: Since the Company is in the business of providing healthcare Following table summarizes savings achieved in services and is not engaged in any manufacturing process, 2017-18 with specific efforts on energy conservation the compliance with Clean Development Mechanism is not and energy cost savings: applicable. Hence, no projects relating to the same has been undertaken by the company. (` in mn) Activity Benefits 5. Has the company undertaken any other initiatives on – (Approximate) clean technology, energy efficiency, renewable energy, etc. Operating Procedure Optimization 2.40 Y/N. If yes, please give hyperlink for web page etc. Energy Conservation Project 1.42 through Bosch Yes, as part of the sustainability initiatives following activities have been undertaken in 2017-18: Sourcing Renewable Energy 2.00 through Open Access (Total a. Waste audit at our Health City Campus through a 20 Lac kWh was sourced from Germany based Environment Consultancy firm to Dec’17) identify the scope for waste reduction, reuse and Power Factor Improvement and 1.59 recycle. Contract demand optimization Total 7.41 b. Completed six (6) comprehensive energy audits Note: at facilities located in Bangalore, Howrah, Jaipur, Ahmedabad, Kolkata, Jamshedpur in association with The numbers presented above are those calculated The Energy Research Institute (TERI), a renowned for the time from which various activities were Industry Expert. commissioned which were mostly towards middle of the year. Hence, they do not represent the annual c. Completed twelve (12) internal energy audits through benefit, and represent only the approximate values of in-house expertise at hospitals located across India. actual benefits in 2017-18. Successfully commissioned an energy conservation There is an understanding that effective sustainability project worth ` 9.1 mn, at Health City Campus located policies, like water conservation, have a positive in Bangalore resulting in an estimated savings of ` 3.4 impact on the environment, they provide cost mn/year. savings and, ultimately, help deliver better patient care. Looking ahead, the company is in the process d. Sourcing 85% of Health City (2 facilities) energy of understanding how climate change will affect consumption from renewable energy source (Solar). water supply in locations where water may pose a e. Reasonable power factor improvement and contract material risk to operations and measures that can be demand optimization has been achieved at facilities implemented now to mitigate the risk. located in Kolkata (5 facilities), Jamshedpur and 6. Are the Emissions/Waste generated by the company within Bangalore. A consistent power factor of 0.95 or more the permissible limits given by CPCB/SPCB for the financial is maintained at majority of facilities, resulting in an year being reported? anticipated savings of ` 1.9 mn/year from power factor incentives. Yes. f. Phased replacement of conventional lighting with 7. Number of show cause/ legal notices received from CPCB/ energy efficient LED fittings across all our hospitals. SPCB which are pending (i.e. not resolved to satisfaction) as on end of the Financial Year. Annual Report 2017-18 89 Company Overview Statutory Reports Financial Statements The Company has not received any show cause notices c. To allow Foreign Medical Graduates to work from pollution control board during the financial year under in Primary Healthcare Centers to qualify for review. certification by MCI. Principle 7 (iii) Information Technology in Healthcare: 1. Is your company a member of any trade and chamber or a. Working on mobile based inpatient records for association? If Yes, Name only those major ones that your hospitals for better decision making in patient business deals with: care. Yes, Narayana Hrudayalaya Limited is a Member of b. Working on technology aided fire safety Association of Healthcare Providers (India) - (“AHPI”) measures for hospitals. 2. Have you advocated/lobbied through above associations for c. Promoting tele-consultations and online the advancement or improvement of public good? Yes/No; consultations to increase accessibility of if yes specify the broad areas (drop box: Governance and healthcare in remote areas. Administration, Economic Reforms, Inclusive Development d. Patient Health Records on mobile phones / Policies, Energy security, Water, Food Security, Sustainable Cloud. Business Principles, Others). e. Prescription rights for online prescriptions. Narayana Hrudayalaya Limited has represented through AHPI for the following initiatives: f. Paperless hospitals compliant with legal and clinical requirements. (i) Medical Education Reforms: g. Associating with institutions like IISc for a. Successfully made presentation for recognition development of simulation training for nurses. of Diplomas from College of Physicians and Surgeons (CPS) by Central Government to (iv) Public Health Policy: convert existing MBBS doctors in government a. Part of Global Committee to advice Japanese hospitals to intermediate specialists; Government on healthcare initiatives to be taken up in developing and underdeveloped nations b. Successfully represented to start Nurse by Japan, which will head the G20 Summit for Practitioner course and pursuing Nurse 2019-20. Intensivist and Nurse Anesthetist courses to provide career progression for nurses. b. Part of High Level Group on Health Sector constituted by 15th Finance Commission, c. Created a framework and international working Government of India. group towards establishment of Global Medical University for Asia, Africa and Latin American c. Instrumental in formulating Karnataka Public Countries to address the shortage of doctors, Health Policy under Karnataka Knowledge nurses and paramedics. Commission. (ii) Primary and Secondary Healthcare, Rural d. Have been a prominent opinion maker for Central Healthcare: Government’s Universal Health Coverage a. Reducing Maternal and Infant Mortality Rates by scheme. 50% within 2020 by having adequate specialists. e. Major contributor for State and National Skill To reduce the shortage of specialists in Development initiatives in Healthcare. Community Health Centres and Taluka hospitals Principle 8 through intermediate specialists / Diplomas from 1. Does the company have specified programmes/initiatives/ CPS; projects in pursuit of the policy related to Principle on b. Empower nurses with Nurse Practitioner inclusive growth and equitable development? If yes details certification to effectively manage Primary there. Healthcare Centres. Over the past decade, Company has rolled out several 90 Narayana Hrudayalaya Limited social initiatives whether in fields of healthcare or education. general hospital. With implementation of this workflow The healthcare initiatives are mainly taken up in rural/semi- innovation, there has been a 50% rise in detection of rural areas or places where there is lack of availability of high risk pregnancy cases. Over the past year, our adequate healthcare services. team has also coordinated the blood transfusion for 268 severely anaemic women at the Government I. e Health Centre General Hospital. Regular communitisation activities Keeping in view the felt need for improving technology were conducted by field staff to improve awareness enabled primary health care in India, the initiative of towards anemia, signs and symptoms of high risk “e Health Centre programme” has been taken up by pregnancies and need for early referral of pregnant the Company with Hewlett Packard (HP) and Council women identified with such conditions. of Scientific & Industrial Research (CSIR) India. The objective of the programme is to deliver quality and III. Mobile Mammography Screening affordable health care to people living in resource- Through the ‘Mobile Mammography Unit’ program, deprived locations of India using appropriate the Company is creating awareness among the technologies. Company has tried to address access, people about breast cancer diagnosis and treatment. affordability, quality and equity of care at the primary Keeping in mind the rapidly rising incidence of breast health care level through the eHC Program. A Total cancer, the mobile mammography screening unit of 9 eHealth Centres have been established in states was inaugurated at Mazumdar Shaw Multi-specialty of Karnataka, West Bengal, Rajasthan and Gujarat. Hospital on 4th February 2014. Since then, the program A total footfall of 64,037 has been witnessed since has screened more than 20,000 women through 541 inception. In the last financial year, 28,572 patients camps organized across several districts in Karnataka. were provided teleconsultations, 3,200 people were In the process, 5,335 mammograms were conducted screened through 40 general and specialty camps and till date, 43 women have been diagnosed with and 144 community meetings were conducted to breast cancer and treated successfully. In the past educate local population on the prevalent diseases financial year, the program reached out to 7,000 and ways of prevention. As per the findings of a socio- women through 171 camps and 2,048 mammograms economic impact study conducted across five centres were conducted. to understand impact of telemedicine on out of pocket expenditures at the community level, there has been a IV. udaan program reduction in direct expenses (consultation, medicines, investigations) by 36% and indirect expenses (wage Company’s social initiative with a focus on educating loss, travel cost) by 44% post inception of eHCs. and mentoring selected students from economically challenged family backgrounds to become doctors II. Shorapur Maternal Obstetric Monitoring (MOM) is the brainchild of Dr. Devi Shetty, Chairman of the Program Company. It offers scholarships to bright students from disadvantaged rural backgrounds to become The Company is involved in a maternal health program doctors. It follows a streamlined selection process to in North Karnataka. The program aims to address the ensure that deserving and bright students who aspire unmet healthcare needs in this high priority district. Set to make a career in medicine are given the required against the background of a low Human Development support and resources to achieve their dreams. Index as well as Gender Development Index, our In collaboration with Mindtree, 56 high-school CSR program in Shorapur has focused on creating students had been identified for the program of awareness by placing emphasis on promotive and which 26 students progressed to join Jain University. preventive aspects of ante natal care apart from With additional support from Jain University, the focusing on improving the infrastructure at the students have been coached, mentored and would Taluka hospital. Since November 2016, Company’s be appearing for medical selection test in current radiologists have regularly travelled to Shorapur and year. The Udaan Bidar program was initiated with have conducted 5185 free USG reviews for pregnant Shaheen group of Institutions in Bidar wherein 20 women. Almost 20% of the pregnant women were pre-university students have been selected and diagnosed with high-risk conditions and referred to provided full scholarship. The Udaan students are nearest District hospital. Narayana Health introduced regularly motivated and mentored by Group’s panel High Risk Pregnancy identification forms to evaluate of doctors. and identify high risk pregnancy at the government Annual Report 2017-18 91 Company Overview Statutory Reports Financial Statements V. Care Companion Program VIII. Non-Communicable Diseases (NCD) Program The Care Companion Program was first set up in This new program was initiated in June 2017 with a 2013 in Company’s Mysore unit. The program was focus to improve awareness and conduct screening started in direct response to the needs of patients for non-communicable diseases including breast and to recognize patient family members as an and oral cancer. The focus has been on a continuum untapped existing resource. The program objective of activities including promotive, preventive and is to harnesses patient attendant capabilities by curative services. The program has been initiated at creating a position for them within the current hospital five locations – Mysore, Jamshedpur, Delhi, Howrah personnel framework and, through a training process, and Bangalore. In collaboration with various local to become additional in-hospital Care Companions. institutions, government healthcare bodies and Since its inception in 2013, more than 80,000 families non-governmental organizations, the program has have been educated, with 45,000 families who were been able to serve more than 5,000 people in the trained in the last financial year. As per an impact last year. Post the awareness sessions conducted study conducted across five units to assess caregiver by the NCD team, impact assessment surveys were competencies and perception, 82% of the care givers conducted amongst a section of the population and it stated that they have learnt to deal with the medical was found that there had been an overall increase of situation while 87% stated that they felt confident of 40% in the knowledge about breast and oral cancer handling patient care requirements after attending the amongst the respondents. Patients identified with oral program. lesions or breast pathologies were further provided free consultation, biopsies and relevant diagnostic VI. Rajiv Gandhi Arogya Yojana Program interventions. The Rajiv Gandhi Arogya Yojana program was initiated on 25th November 2005 in order to develop a model 2. Are the programmes/projects undertaken through in- of rural primary health care system in Amethi. The house team/own foundation/external NGO/government program focuses on the aspects of primary healthcare structures/any other organization? service delivery like free consultation, free medicines The Company has a CSR team which is involved in various and dressing of wounds. Each clinic operates for 4 programs with focus on health, education and vocational hours a day and 6 days in a week. The objective of the training. Company follows a project based approach program is to provide free of cost primary healthcare for carrying out its CSR initiatives. In the CSR programs, services including free of cost medicines to people Company also collaborate with external NGOs on ground. from poor socio-economic background in Amethi. Since its inception, the program has served more than 3. Have you done any impact assessment of your initiative? 20,65,000 patients from marginalized communities. In the past year, more than 13,000 patients availed The Company conducts impact assessment’s where primary healthcare services at these clinics. feasible. VII. Community Radio Station In the Shorapur MOM program which began in April 2016, the Company’s radiologists have conducted 5185 The Company has supported Narayana Hrudayalaya free USG scans in the Taluka hospital. Almost 20% of the Foundation for the community Radio Programme pregnant women were diagnosed with high-risk conditions and the foundation was granted 90.4 spectrum for and referred to nearest District hospital. The Company establishing a community radio station in Health introduced High Risk Pregnancy identification forms to city, Anekal. The broader objective of our community evaluate and identify high risk pregnancy at the government radio station is to serve as a consensus-building general hospital. With implementation of this workflow platform wherein communication processes would innovation, there has been a 50% rise in detection of high help the communities around us to share common risk pregnancy cases. Over the past year, our team has also understanding and common goals. The community coordinated the blood transfusion for 268 severely anaemic radio was named “Namma Nadi” with focus on health, women at the Government General Hospital. In the eHealth education, environment, culture and civic issues centre program, an impact study was conducted across within the primary and secondary zones of Health five centres to understand impact of telemedicine on out of City Facility in Bangalore. Various programs were pocket expenditures. The study found that there has been aired on Namma Nadi with participation from multiple a reduction in direct expenses (consultation, medicines, communities of interest. 92 Narayana Hrudayalaya Limited investigations) by 36% and indirect expenses (wage loss, after attending the program. In the non-communicable travel cost) by 44% post inception of eHCs. In the Care diseases program, post the awareness sessions conducted Companion Program, as per an impact study conducted by the program team, impact assessment surveys were across five units to assess care giver competencies and conducted amongst a section of the population and it was perception, 82% of the care givers stated that they have found that there had been an overall increase of 40% in learnt to deal with the medical situation while 87% stated the knowledge about breast and oral cancer amongst the that they felt confident of handling patient care requirements respondents. 4. What is your Company’s direct contribution to community development projects- Amount in INR and the details of the projects undertaken? Details of CSR spent during 2017-18: (` in mn) S. CSR project Sector in Projects or Amount Amount spent on projects Cumulative Amount spent: no. or activity which the programs outlay or programs expenditure Direct or identified project is (1) Local area or (budget) Sub-heads: upto the through covered other project or Direct Overheads reporting implementing (2) Specify the programs Expenditure period agency State and district wise on projects or where the projects programs or programs was undertaken 1. Rajiv Gandhi Healthcare Amethi, Uttar 1.87 1.75 0.29 2.04 Direct Arogya Yojana and Pradesh (RAY) Enhancing livelihood 2. Railway Clinics Healthcare Karnataka 1.69 0.60 0.01 0.70 Direct 3. Mobile Healthcare Karnataka 2.72 2.84 0.47 3.31 Direct Mammography Screening 4. Care Healthcare PAN India 1.89 0.67 0.11 0.78 Direct Companion and Program Enhancing livelihood 5. Udaan – A Promoting Karnataka 0.58 0.52 0.09 0.61 Direct Scholarship Education Programme 6. E-Health Center Healthcare PAN India 5.46 6.17 1.02 7.19 Direct and Enhancing livelihood 7. Shorapur MOM Healthcare Karnataka 2.61 2.27 0.38 2.66 Direct Program 8. Community Healthcare Karnataka 0.68 0.04 0.006 0.04 Direct Radio Program and Enhancing livelihood 9. NCD Healthcare Karnataka 2.67 4.71 0.78 5.49 Direct 10. Ground Water Enhancing Karnataka 0.30 - - - Direct Recharge livelihood Total 20.45 19.59 3.23 22.82 Annual Report 2017-18 93 Company Overview Statutory Reports Financial Statements 5. Have you taken steps to ensure that this community 2. Does the company display product information on the development initiative is successfully adopted by the product label, over and above what is mandated as per community? Please explain in 50 words, or so. local laws? Yes/No/N.A. /Remarks (additional information). Community engagement has been a central tenet in most of Company is a healthcare service provider and hence this our programs and taking the narrative to the field has been question is not applicable. a critical program deliverable. For instance, in the Shorapur Maternal health program, Non-communicable diseases 3. Is there any case filed by any stakeholder against the program as well as Community Radio program, the project company regarding unfair trade practices, irresponsible team has been actively involved in communitisation advertising and/or anti-competitive behavior during the last activities. Apart from regularly meeting and updating the five years and pending as on end of financial year. If so, frontline ASHA workers, meetings have also been held provide details thereof, in about 50 words or so with Anganwadi staff to apprise them about the program. We have also reached out to communities of interest, NIL Gram Panchayat representatives, NGOs and SHGs in the adjoining areas. Based on these regular interactions, our 4. Did your company carry out any consumer survey/ program has gained traction and most frontline healthcare consumer satisfaction trends? workers in the regional areas are aware of our programs. The Company collects patient feedback (OP, IP and health Principle 9 check-up patients) through physical feedback forms. Feedback is also collected through the website and 1. What percentage of customer complaints/consumer cases reviewed by the Company. are pending as on the end of financial year. 99 cases are pending before consumer forums and civil courts pertaining to customers and 20 criminal matters are pending as on the end of financial year. 94 Narayana Hrudayalaya Limited Annexure IX Form No. MR-3 SECRETARIAL AUDIT REPORT For the Financial Year ended 31st March 2018 [Pursuant to Section 204(1) of the Companies Act, 2013 and Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014] To , 4. Foreign Exchange Management Act, 1999 and the Rules The Members, and Regulations made there under to the extent of Foreign NARAYANA HRUDAYALAYA LIMITED Direct Investment, Overseas Direct Investment and External CIN: L85110KA2000PLC027497 Commercial Borrowings; No. 258/A, Bommasandra Industrial Area, Anekal Taluk, Bengaluru - 560099 5. The following Regulations and Guidelines prescribed under the Securities and Exchange Board of India Act, 1992 We have conducted the Secretarial Audit of the compliance (‘SEBI Act’) :- of applicable statutory provisions and adherence to good corporate practices by “NARAYANA HRUDAYALAYA LIMITED” a) The Securities and Exchange Board of India (CIN: L85110KA2000PLC027497) having its registered office (Substantial Acquisition of Shares and Takeovers) at No. 258/A, Bommasandra Industrial Area, Anekal Taluk, Regulations, 2011; Bengaluru - 560099 (herein after referred to as “Company”). The Secretarial Audit was conducted in a manner that provided b) The Securities and Exchange Board of India us a reasonable basis for evaluating the corporate conducts/ (Prohibition of Insider Trading) Regulations, 1992; statutory compliances and expressing our opinion thereon. c) The Securities and Exchange Board of India (Issue of Based on our verification of the Company’s books, papers, Capital and Disclosures Requirements) Regulations, minute books, forms and returns filed and other records 2009; maintained by the Company and also the information, declaration of compliance provided by the Company, its officers, agents d) Securities and Exchange Board of India (Share Based and authorized representatives during the conduct of Secretarial Employee Benefits) Regulations, 2014. Audit, we hereby report that in our opinion, the Company has, during the audit period covering the financial year ended on e) The Securities and Exchange Board of India (Issue 31st March 2018, complied with the statutory provisions listed and Listing of Debt Securities) Regulations, 2008; hereunder and also that the Company has proper Board- processes and compliance-mechanism in place to the extent, in f) The Securities and Exchange Board of India the manner and subject to the reporting made hereinafter: (Registrars to an Issue and Share Transfer Agents) Regulations, 1993 regarding the Companies Act and We have examined the books, papers, minute books, forms and dealing with client; returns filed and other records maintained by the Company for the financial year ended on 31st March 2018 according to the g) The Securities and Exchange Board of India (Delisting provisions of: of Equity Shares) Regulations, 2009; and 1. The Companies Act, 2013, (the Act) and the rules made h) The Securities and Exchange Board of India (Buyback there under; of Securities) Regulations, 1998; 2. The Securities Contracts (Regulation) Act, 1956 (‘SCRA’) 6. Other laws specifically applicable to the Company; and the rules made there under; i. Employees Provident Fund and Miscellaneous 3. The Depositories Act, 1996 and the Regulations and Bye- Provisions Act, 1952. laws framed there under; ii. Employees State Insurance Act, 1948. Annual Report 2017-18 95 Company Overview Statutory Reports Financial Statements iii. Environment Protection Act, 1986 and other applicable xxv. The Information Technology Act, 2000 environmental laws. xxvi. The Sexual Harassment of Women at Workplace iv. Indian Contract Act, 1872. (Prevention, Prohibition and Redressal) Act, 2013 v. Income Tax Act, 1961 and other related laws. xxvii. The Central Goods and Service Tax Act, 2017 with effect from 1st July 2017 vi. Indian Stamp Act, 1999. We have relied on the representation made by the Company vii. Payment of Bonus Act, 1965. and its Officers for systems and mechanism formed by the Company for compliances under other applicable Acts, viii. Payment of Gratuity Act, 1972 and such other Laws, Rules and Regulations to the Company. We have applicable labour laws. also examined compliance with the applicable clauses of the following: ix. Clinical Establishments (Registration & Regulations) Act, 2010. a) Secretarial Standards issued by The Institute of Company Secretaries of India notified as applicable x. Karnataka Private Medical Establishments Act, 2007. to Companies pursuant to Section 118 (10) of the Companies Act 2013. xi. Drugs and Cosmetics Act, 1940 and Rules 1945. b) The SEBI (Listing Obligations and Disclosure xii. Indian Medical Council (Professional Conduct, Etiquette Requirements) Regulations, 2015 as amended from and Ethics) Regulations, 2002 (Ethics Regulations). time to time. xiii. Atomic Energy Act, 1962 and Rules thereunder. c) Tripartite Agreements signed with National Securities Depositories Limited and Central Securities Depositories xiv. Narcotic Drugs and Psychotropic Substance Act, (India) Limited. 1985. During the period under review, the Company has largely xv. Medical Termination of Pregnancy Act, 1971. complied with the provisions of the Act, Rules, Regulations, Guidelines, Standards, etc. mentioned above. xvi. Pre-Natal Diagnostic Techniques (Regulations & Preventions of Misuse) Act, 1994. we further report that: xvii. Transplantation of Human Organs Act, 1994. i. The Board of Directors of the Company is duly constituted with proper balance of Executive Directors Non- xviii. Registration of Births and Deaths Act, 1969. Executive Directors, Woman Director and Independent Directors. At the Board meeting held on 25th October xix. Water (Prevention and Control of Pollution) Act, 1974. 2017 Mr. Arun Seth, Director had vacated the office as per Section 167(1)(a) of the Companies Act, 2013. xx. Air (Prevention and Control of Pollution) Act, 1981. However, as per interim order passed by the Hon’ble High Court of Calcutta, he was reinstated as Director at xxi. Environment Protection Act, 1986. the Board meeting held on 31st January 2018. xxii. Bio-medical Waste (Management and Handling) ii. Adequate notice is given to all directors to schedule Rules, 1998. the Board and other Committee meetings. Agenda and detailed notes on agenda were sent at least seven xxiii. Hazardous Wastes (Management, Handling and days in advance and a system exists for seeking and Trans Boundary Movement) Rules, 2008. obtaining further information and clarifications on the agenda items before the meeting and for meaningful xxiv. Pre-conception and Prenatal Diagnostic Techniques participation at the meeting. (Prohibition of Sex Selection) Rules, 1996. 96 Narayana Hrudayalaya Limited iii. Majority decisions are carried through in each such v. M/s. Deloitte Haskins and Sells LLP, (FRN: 117366W/ meetings of the Board and committees of the Board. W-100018), Chartered Accountants have been Further during the course of audit, we have not come appointed as Statutory Auditors of the Company at the across the views of dissenting members’ recorded as 17th Annual General Meeting held on 3rd August 2017 part of the minutes. in place of M/s. B S R & Co. LLP (FRN: 101248W/W- 100022) as the latter has completed its tenure and is We further report that there are adequate systems and not eligible for re-appointment pursuant to Section processes in the Company commensurate with the size 139(2) of the Companies Act 2013. and operations of the company to monitor and ensure compliance especially relating to clinical section, with vi. M/s. Health City Cayman Islands Limited (HCCI) applicable laws, rules, regulations and guidelines. We are is a company incorporated in Cayman Islands. The given to understand that the Company has taken effective Company holds 28.6% equity shares in HCCI through steps to further strengthen the compliance mechanism its Wholly Owned subsidiary Narayana Cayman through systems and processes which would be made Holdings Limited (NCHL) and the balance 71.4% of functional during the current financial year. the shares of HCCI were held by Ascension Health Ventures LLC, USA, (AHV) an affiliate of Ascension We further report that during the audit period, the Company Health Alliance, USA (AHA). HCCI bought back 71.4% has reported following events/activities having major held by AHV during the year under review. By this buy bearing on the Company’s affairs in pursuance of the above back of shares, HCCI become a 100% step down referred laws, rules, regulations, guidelines, standards etc.: subsidiary of the Company and which was funded by the Company. The fund provided by the Company is i. Approval of Shareholders was taken at the Annual within the limits approved by the shareholders as per General Meeting held on 3rd August 2017 by way provisions of Section 186 of the Companies Act, 2013. of special resolutions for alteration of Articles of Association with respect to removal of common seal We further report that, during the audit period, there were clause in Articles. no instances of: ii. Approval of the members was taken at the Annual a) Public / Rights / Preferential issue of shares / General Meeting held on 3rd August 2017 to debentures / sweat equity. amalgamate M/s. NewRise Healthcare Private Limited, Wholly Owned Subsidiary with the Company. b) Redemption buy / back of securities iii. Approval of the shareholders were taken through c) Foreign technical collaborations. Postal Ballot on 11th August 2017 by way of special resolutions to increase the limits for providing Loans, This report shall be read with our letter of even date which Guarantee, Security and making Investments not is annexed as Annexure-A and forms an integral part of this exceeding to ` 2000 crores under Section 186 of the report. Companies Act, 2013. iv. The Regional Director, South East Region, Hyderabad For Ganapathi & Mohan has confirmed the order of scheme of merger or Company Secretaries amalgamation between M/s. Newrise Healthcare Private Limited, a Wholly Owned Subsidiary with CS. G M Ganapathi Narayana Hrudayalaya Limited vide order 3/ Partner (Karnataka)/CP No. 5/2017/RD(SER)/Sec.233 of CA Place: Bengaluru FCS. 5659; C.P: 4520 2013/2017/2624 dated 4th October 2017. Date: 29th May 2018 (FRN: P2002KR057100) Annual Report 2017-18 97 Company Overview Statutory Reports Financial Statements Annexure A To, The Members, M/s. NARAYANA HRUDAYALAYA LIMITED CIN: L85110KA2000PLC027497 No. 258/A, Bommasandra Industrial Area, Anekal Taluk, Bengaluru - 560099 Our report of even date is to be read along with this letter. a. Maintenance of Secretarial record is the responsibility of the management of the Company. Our responsibility is to express an opinion on the maintenance of these secretarial records based on our audit. b. We have followed the audit practices and process as were appropriate to obtain reasonable assurance about the correctness of the contents of the Secretarial records. We believe that the processes and practices we followed, provide a reasonable basis for our opinion. c. Wherever required, we have obtained the Management representation about the compliance of laws, rules and regulations and happening of events etc. d. The compliance of the provisions of Corporate and other applicable laws, Rules, Regulations, standards is the responsibility of management. Our examination was limited to the verification of procedures on test basis. e. The Secretarial Audit report is neither an assurance as to the future viability of the Company nor of the efficacy or effectiveness with which the management has conducted the affairs of the Company. f. We further report that, based on the information provided by the Company, its officers, authorised representatives during the conduct of the audit, in our opinion adequate systems and process and control mechanism exist in the Company to monitor compliance with applicable general laws like Labour laws & Environment laws and Data protection policy. g. We further report that the Compliance by the Company of applicable financial laws like Direct & Indirect tax laws, the correctness and appropriateness of financial records and books of accounts of the Company has not been reviewed in this audit since the same has been subject to review by the statutory financial audit and other designated professionals. For Ganapathi & Mohan Company Secretaries CS. G M Ganapathi Partner Place: Bengaluru FCS. 5659; C.P: 4520 Date: 29th May 2018 (FRN: P2002KR057100) 98 Narayana Hrudayalaya Limited Annexure X DISCLOSURES BY THE BOARD OF DIRECTORS [Pursuant to Rule 12(9) of the Companies (Share Capital and Debentures) Rules, 2014 read with Regulation 14 of SEBI (Share Based Employee Benefits) Regulations 2014] A. Details related to ESOP (i) Summary of status of ESOP (a) Date of shareholders’ approval 12th September 2015 (b) Total number of options approved 2040000 under ESOP (c) Vesting requirements All vested Options shall be respectively exercised in one or more tranches within a period of 4 (four) years from the date of first Vesting, failing which the Options shall lapse. (d) Exercise price or pricing formula Exercise Price: ` 10 each option. Pricing Formula: The options are granted at face value of ` 10 per equity share. The number of options granted to each eligible employees are determined by his length of service and current responsibility handled and future potential contribution. (e) Maximum term of options granted 4 years. (f) Source of shares (primary, secondary Secondary Market. or combination) (g) Variation in terms of options Nil (ii) Method used to account for ESOP - Fair Value. Refer to note 42 of Consolidated Financial Statements. B. Option movement during the year (for each ESOP): Particulars Details Number of options outstanding at the beginning of the period 781283 Number of options granted during the year Nil Number of options forfeited / lapsed during the year 990 Number of options vested during the year 161794 Number of options exercised during the year 54020 Number of shares arising as a result of exercise of options 54020 Money realized by exercise of options (INR), if scheme is implemented directly by the 540200 company Loan repaid by the Trust during the year from exercise price received Nil Number of options outstanding at the end of the year 726273 Number of options exercisable at the end of the year 159994 C. employee wise details (Name of employee, Designation, Number of options vested during the year, exercise price of options vested to: (a) Senior Managerial Personnel 1. Mr. Sunil Kumar C N, Regional Director, a. Options vested during the year:2198 b. Options exercised during the year: Nil c. Exercise Price: ` 10/-. 2. Mr. R Venkatesh, Regional Director, a. Options vested during the year: 2198 b. Options exercised during the year: 2198 c. Exercise Price: ` 10/-. (b) Any other employee who receives a grant in any one year of option None amounting to 5% or more of option granted during that year and (c) Identified employees who were granted option, during any one year, None equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the company at the time of grant. Annual Report 2017-18 99 Company Overview Statutory Reports Financial Statements D. Description of the method and significant assumptions used during the year to estimate the fair value of options including the following information: (a) the weighted-average values of share price, exercise price, Refer note no 42 of consolidated financial expected volatility, expected option life, expected dividends, the statements. risk-free interest rate and any other inputs to the model; (b) the method used and the assumptions made to incorporate the Method- Black Scholes Valuation option pricing effects of expected early exercise; model (c) how expected volatility was determined, including an explanation Refer note no 42 of consolidated financial of the extent to which expected volatility was based on historical statements. volatility; and (d) whether and how any other features of the option grant were None. incorporated into the measurement of fair value, such as a market condition. E. Disclosures in respect of grants made in three years prior to IPO under each ESOP - Nil F. Disclosures in respect of transactions made by Trust under ESOP scheme (i) general information on the scheme Sl. Particulars Details No. 1 Name of the Trust Narayana Health Employees Benefits Trust 2 Details of the Trustee(s) Mr. A Shankar and Mr. Murali Krishnan K N Amount of loan disbursed by company/any company in the group, 3 NIL during the year Amount of loan outstanding (repayable to company/ any company in 4 NIL the group) as at the end of the year Amount of loan, if any, taken from any other 5 source for which company/any company in the NIL group has provided any security or guarantee Any other contribution made to 6 NIL the Trust during the year (ii) Brief details of transactions in shares by the Trust 1. Number of shares held at the beginning of the year; 2007553 2. Number of shares acquired during the year through primary issuance 0 secondary acquisition, also as a percentage of paid up equity capital as at the end of the previous financial year, along with information on weighted average cost of acquisition per share; 3. Number of shares transferred to the employees / sold along with the 54020 purpose thereof; 4. Number of shares held at the end of the year. 1953533 (iii) In case of secondary acquisition of shares by the Trust- Number of shares As a percentage of paid-up equity capital as at the end of the year immediately preceding the year in which shareholders’ approval was obtained Held at the beginning of the year Acquired during the year Sold during the year Not Applicable. Transferred to the employees during the year Held at the end of the year 100 Narayana Hrudayalaya Limited FINANCIAL STATEMENTS STANDALONE CONSOLIDATED Company Overview Statutory Reports Financial Statements Independent Auditor’s Report To the Members of We conducted our audit of the standalone financial statements Narayana Hrudayalaya Limited in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we Report on the Standalone Financial Statements comply with ethical requirements and plan and perform the audit We have audited the accompanying standalone financial to obtain reasonable assurance about whether the standalone statements of Narayana Hrudayalaya Limited (“the Company”), financial statements are free from material misstatement. which comprise the Balance Sheet as at March 31, 2018, and the Statement of Profit and Loss (including Other Comprehensive An audit involves performing procedures to obtain audit evidence Income), the Cash Flow Statement and the Statement of about the amounts and the disclosures in the standalone Changes in Equity for the year then ended and a summary financial statements. The procedures selected depend on the of the significant accounting policies and other explanatory auditor’s judgment, including the assessment of the risks of information. material misstatement of the standalone financial statements, whether due to fraud or error. In making those risk assessments, Management’s Responsibility for the Standalone the auditor considers internal financial control relevant to the Financial Statements Company’s preparation of the standalone financial statements The Company’s Board of Directors is responsible for the matters that give a true and fair view in order to design audit procedures stated in Section 134(5) of the Companies Act, 2013 (“the Act”) that are appropriate in the circumstances. An audit also includes with respect to the preparation of these standalone financial evaluating the appropriateness of the accounting policies used statements that give a true and fair view of the financial position, and the reasonableness of the accounting estimates made financial performance including other comprehensive income, by the Company’s Directors, as well as evaluating the overall cash flows and changes in equity of the Company in accordance presentation of the standalone financial statements. with the Indian Accounting Standards (Ind AS) prescribed under section 133 of the Act read with the Companies (Indian We believe that the audit evidence obtained by us is sufficient Accounting Standards) Rules, 2015, as amended, and other and appropriate to provide a basis for our audit opinion on the accounting principles generally accepted in India. standalone financial statements. This responsibility also includes maintenance of adequate Opinion accounting records in accordance with the provisions of the Act In our opinion and to the best of our information and according to for safeguarding the assets of the Company and for preventing the explanations given to us, the aforesaid standalone financial and detecting frauds and other irregularities; selection and statements give the information required by the Act in the manner application of appropriate accounting policies; making so required and give a true and fair view in conformity with the judgments and estimates that are reasonable and prudent; and Ind AS and other accounting principles generally accepted in design, implementation and maintenance of adequate internal India, of the state of affairs of the Company as at March 31, financial controls, that were operating effectively for ensuring 2018, and its profit, total comprehensive income, its cash flows the accuracy and completeness of the accounting records, and the changes in equity for the year ended on that date. relevant to the preparation and presentation of the standalone financial statements that give a true and fair view and are free Report on Other Legal and Regulatory Requirements from material misstatement, whether due to fraud or error. 1. As required by Section 143(3) of the Act, based on our audit we report that: Auditor’s Responsibility a) We have sought and obtained all the information and Our responsibility is to express an opinion on these standalone explanations which to the best of our knowledge and financial statements based on our audit. belief were necessary for the purposes of our audit. In conducting our audit, we have taken into account the b) In our opinion, proper books of account as required provisions of the Act, the accounting and auditing standards by law have been kept by the Company so far as it and matters which are required to be included in the audit report appears from our examination of those books. under the provisions of the Act and the Rules made thereunder and the Order issued under section 143(11) of the Act. c) The Balance Sheet, the Statement of Profit and Loss including Other Comprehensive Income, the Cash 102 Narayana Hrudayalaya Limited Independent Auditor’s Report (Contd.) Flow Statement and Statement of Changes in Equity i. The Company has disclosed the impact of dealt with by this Report are in agreement with the pending litigations on its financial position in its books of account. standalone financial statements; d) In our opinion, the aforesaid standalone financial ii. The Company has made provision, as required statements comply with the Indian Accounting under the applicable law or accounting Standards prescribed under section 133 of the Act. standards, for material foreseeable losses, if any, on long-term contracts including derivative e) On the basis of the written representations received contracts. from the directors of the Company as on March 31, 2018 taken on record by the Board of Directors, none iii. There were no amounts which were required of the directors is disqualified as on March 31, 2018 to be transferred to the Investor Education and from being appointed as a director in terms of Section Protection Fund by the Company. 164(2) of the Act. 2. As required by the Companies (Auditor’s Report) Order, f) With respect to the adequacy of the internal financial 2016 (“the Order”) issued by the Central Government in controls over financial reporting of the Company and terms of Section 143(11) of the Act, we give in “Annexure B” the operating effectiveness of such controls, refer a statement on the matters specified in paragraphs 3 and 4 to our separate Report in “Annexure A”. Our report of the Order. expresses an unmodified opinion on the adequacy and operating effectiveness of the Company’s internal financial controls over financial reporting. For DELOITTE HASKINS & SELLS LLP Chartered Accountants g) With respect to the other matters to be included in (Firm’s Registration No. 117366W/W-100018) the Auditor’s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, V. Balaji as amended, in our opinion and to the best of our Partner information and according to the explanations given Bengaluru, May 29, 2018 (Membership No 203685) to us: Annual Report 2017-18 103 Company Overview Statutory Reports Financial Statements Annexure “A” to the Independent Auditor’s Report (Referred to in paragraph 1 (f) under ‘Report on obtain reasonable assurance about whether adequate internal Other Legal and Regulatory Requirements’ section financial controls over financial reporting was established of our report of even date) and maintained and if such controls operated effectively in all material respects. Report on the Internal Financial Controls Over Financial Reporting under Clause (i) of Sub-section Our audit involves performing procedures to obtain audit evidence 3 of Section 143 of the Companies Act, 2013 (“the about the adequacy of the internal financial controls system over Act”) financial reporting and their operating effectiveness. Our audit We have audited the internal financial controls over financial of internal financial controls over financial reporting included reporting of Narayana Hrudayalaya Limited (“the Company”) as obtaining an understanding of internal financial controls over of March 31, 2018 in conjunction with our audit of the standalone financial reporting, assessing the risk that a material weakness financial statements of the Company for the year ended on that exists, and testing and evaluating the design and operating date. effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor’s judgement, Management’s Responsibility for Internal Financial including the assessment of the risks of material misstatement of Controls the financial statements, whether due to fraud or error. The Company’s management is responsible for establishing and maintaining internal financial controls based on the internal control We believe that the audit evidence we have obtained is sufficient over financial reporting criteria established by the Company and appropriate to provide a basis for our audit opinion on the considering the essential components of internal control stated Company’s internal financial controls system over financial in the Guidance Note on Audit of Internal Financial Controls reporting. over Financial Reporting issued by the Institute of Chartered Accountants of India. These responsibilities include the design, implementation and maintenance of adequate internal financial Meaning of Internal Financial Controls Over Financial controls that were operating effectively for ensuring the orderly Reporting and efficient conduct of its business, including adherence to A company’s internal financial control over financial reporting respective company’s policies, the safeguarding of its assets, is a process designed to provide reasonable assurance the prevention and detection of frauds and errors, the accuracy regarding the reliability of financial reporting and the preparation and completeness of the accounting records, and the timely of financial statements for external purposes in accordance preparation of reliable financial information, as required under with generally accepted accounting principles. A company’s the Companies Act, 2013. internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of Auditor’s Responsibility records that, in reasonable detail, accurately and fairly reflect Our responsibility is to express an opinion on the Company’s the transactions and dispositions of the assets of the company; internal financial controls over financial reporting based on our (2) provide reasonable assurance that transactions are recorded audit. We conducted our audit in accordance with the Guidance as necessary to permit preparation of financial statements in Note on Audit of Internal Financial Controls Over Financial accordance with generally accepted accounting principles, and Reporting (the “Guidance Note”) issued by the Institute of that receipts and expenditures of the company are being made Chartered Accountants of India and the Standards on Auditing only in accordance with authorisations of management and prescribed under Section 143(10) of the Companies Act, 2013, directors of the company; and (3) provide reasonable assurance to the extent applicable to an audit of internal financial controls. regarding prevention or timely detection of unauthorised Those Standards and the Guidance Note require that we comply acquisition, use, or disposition of the company’s assets that with ethical requirements and plan and perform the audit to could have a material effect on the financial statements. 104 Narayana Hrudayalaya Limited Annexure “A” to the Independent Auditor’s Report (Contd.) Inherent Limitations of Internal Financial Controls financial reporting were operating effectively as at March 31, Over Financial Reporting 2018, based on the internal financial control over financial Because of the inherent limitations of internal financial controls reporting criteria established by the Company considering the over financial reporting, including the possibility of collusion essential components of internal control stated in the Guidance or improper management override of controls, material Note on Audit of Internal Financial Controls Over Financial misstatements due to error or fraud may occur and not be Reporting issued by the Institute of Chartered Accountants of detected. Also, projections of any evaluation of the internal India. financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. For DELOITTE HASKINS & SELLS LLP Chartered Accountants Opinion (Firm’s Registration No. 117366W/W-100018) In our opinion, to the best of our information and according to the explanations given to us, the Company has, in all material V. Balaji respects, an adequate internal financial controls system over Partner financial reporting and such internal financial controls over Bengaluru, May 29, 2018 (Membership No 203685) Annual Report 2017-18 105 Company Overview Statutory Reports Financial Statements Annexure “B” to the Independent Auditor’s Report (Referred to in paragraph 2 under ‘Report on Other (b) The schedule of repayment of principal and payment Legal and Regulatory Requirements’ section of our of interest has been stipulated and repayments or report of even date) receipts of principal amounts and interest have been (i) (a) The Company has maintained proper records regular as per stipulations. showing full particulars, including quantitative details (c) There is no overdue amount remaining outstanding as and situation of fixed assets. at the year-end. (b) The Company has a program of verification of fixed (iv) In our opinion and according to the information and assets to cover all the items in a phased manner explanations given to us, the Company has complied with over a period of 3 years which, in our opinion, is the provisions of Sections 185 and 186 of the Companies reasonable having regard to the size of the Company Act, 2013 in respect of grant of loans, making investments and the nature of its assets. Pursuant to the program, and providing guarantees and securities, as applicable. certain fixed assets were physically verified by the Management during the year. According to the (v) According to the information and explanations given to us, information and explanations given to us, no material the Company has not accepted any deposits during the discrepancies were noticed on such verification. year and does not have any unclaimed deposits. (c) According to the information and explanations given (vi) The maintenance of cost records has been specified to us and the records examined by us and based by the Central Government under section 148(1) of the on the examination of the registered sale deed / Companies Act, 2013 in respect of services rendered. We transfer deed / conveyance deed provided to us, have broadly reviewed the cost records maintained by we report that, the title deeds, comprising all the the Company pursuant to the Companies (Cost Records immovable properties of land and buildings which and Audit) Rules, 2014, as amended prescribed by the are freehold, are held in the name of the Company Central Government under sub-section (1) of Section 148 as at the balance sheet date. Immovable properties of the Companies Act 2013, and are of the opinion that, of land and buildings whose title deeds have been prima facie, the prescribed cost records have been made pledged as security for loans are held in the name and maintained. We have, however, not made a detailed of the Company based on the confirmations directly examination of the cost records with a view to determine received by us from lenders. In respect of immovable whether they are accurate or complete. properties of land and buildings that have been taken on lease and disclosed as fixed asset in the financial (vii) According to the information and explanations given to us, statements, the lease agreements are in the name of in respect of statutory dues: the Company, where the Company is the lessee in the agreement. (a) The Company has generally been regular in depositing undisputed statutory dues, including Provident Fund, (ii) As explained to us, the inventories were physically verified Employees’ State Insurance, Income-tax, Sales Tax, during the year by the Management at reasonable intervals Service Tax, Customs Duty, Excise Duty, Value Added and no material discrepancies were noticed on physical Tax, Goods and Service Tax, cess and other material verification. statutory dues applicable to it to the appropriate authorities. (iii) According to the information and explanations given to us, during the year the Company has not granted any (b) There were no undisputed amounts payable in respect loans, secured or unsecured, to companies, firms, Limited of Provident Fund, Employees’ State Insurance, Liability Partnerships or other parties covered in the register Income-tax, Service Tax, Customs Duty, Excise Duty, maintained under section 189 of the Companies Act, 2013. Value Added Tax, Goods and Service Tax, cess and However, in respect loans granted in the earlier years: other material statutory dues in arrears as at March 31, 2018 for a period of more than six months from the (a) The terms and conditions of the grant of such loans date they became payable. are, in our opinion, prima facie, not prejudicial to the Company’s interest. 106 Narayana Hrudayalaya Limited Annexure “B” to the Independent Auditor’s Report (Contd.) (c) Details of dues of Income-tax, Sales Tax and Value Added Tax which have not been deposited as on March 31, 2018 on account of disputes are given below: Forum where Period to which Amount Involved Amount Unpaid Name of Statute Nature of Dues Dispute is the Amount (` in Million) (` In Million) Pending Relates Income tax Act, Income Tax High court of FY 2009-10 12.17 2.17 1961 Karnataka KVAT Act, 2003 Value Added Tax Joint FY 2011-12 and 32.28 22.60* Commissioner of FY 2012-13 Commercial Taxes, Appeals Sales Tax of Entry Tax High court of FY 2010-11 7.41 6.29 Rajasthan Rajasthan FY 2011-12 0.30 0.25 FY 2012-13 0.82 0.69 FY 2103-14 1.47 1.22 *Amount unpaid has been arrived after considering payment aggregating to ` 6.45 million made subsequent to the year end. (viii) In our opinion and according to the information and where applicable, for all transactions with the related explanations given to us, the Company has not defaulted in parties and the details of related party transactions have repayment of loans to banks. The Company has not taken been disclosed in the financial statements etc. as required any loans or borrowings from financial institutions and by the applicable accounting standards. government and has not issued any debentures. (xiv) During the year the Company has not made any preferential (ix) In our opinion and according to the information and allotment or private placement of shares or fully or partly explanations given to us, money raised by way of term convertible debentures and hence reporting under clause loans have been applied by the Company during the year (xiv) of the order is not applicable to the Company. for the purposes for which they were raised. The Company has not raised moneys by way of initial public offer or further (xv) In our opinion and according to the information and public offer (including debt instruments). explanations given to us, during the year the Company has not entered into any non-cash transactions with its (x) To the best of our knowledge and according to the information directors or directors of its subsidiary or associate company and explanations given to us, no fraud by the Company or persons connected with him and hence provisions of and no material fraud on the Company by its officers or section 192 of the Companies Act, 2013 are not applicable. employees has been noticed or reported during the year. (xi) In our opinion and according to the information and (xvi) The Company is not required to be registered under section explanations given to us, the Company has paid / provided 45-IA of the Reserve Bank of India Act, 1934. managerial remuneration in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Companies Act, 2013. For DELOITTE HASKINS & SELLS LLP Chartered Accountants (xii) The Company is not a Nidhi Company and hence reporting (Firm’s Registration No. 117366W/W-100018) under clause (xii) of the Order is not applicable. (xiii) In our opinion and according to the information and V. Balaji explanations given to us the Company is in compliance Partner with Section 188 and 177 of the Companies Act, 2013, Bengaluru, May 29, 2018 (Membership No 203685) Annual Report 2017-18 107 Company Overview Statutory Reports Financial Statements Balance Sheet (` in million) As at As at Particulars Note No. 31 March 2018 31 March 2017 ASSETS Non-current assets Property, plant and equipment 4 9,654.61 6,798.69 Capital work-in-progress 4 303.61 515.74 Intangible assets 4 74.24 25.90 Financial assets Investments 5 5,609.51 3,539.96 Loans 6(a) 454.34 384.57 Other financial assets 7(a) 33.19 29.95 Income tax assets (net) 8 215.15 129.72 Other non-current assets 9(a) 547.47 583.29 Total non-current assets 16,892.12 12,007.82 Current assets Inventories 10 504.80 434.38 Financial assets Trade receivables 11 1,850.66 1,376.16 Cash and cash equivalents 12(a) 200.58 206.99 Bank balances other than above 12(b) 13.80 74.58 Loans 6(b) 72.91 177.98 Other financial assets 7(b) 165.88 384.87 Other current assets 9(b) 237.74 197.88 Total current assets 3,046.37 2,852.84 TOTAL ASSETS 19,938.49 14,860.66 EQUITY AND LIABILITIES Equity Equity share capital 13 2,043.61 2,043.61 Other equity 14 9,163.27 8,541.11 Total equity 11,206.88 10,584.72 Liabilities Non-current liabilities Financial liabilities Borrowings 15(a) 4,470.75 957.03 Other financial liabilities 16(a) 168.28 59.19 Provisions 17(a) 135.66 143.42 Deferred tax liabilities (net) 37 377.35 229.65 Other non-current liabilities 18(a) 217.16 204.77 Total non-current liabilities 5,369.20 1,594.06 Current liabilities Financial liabilities Borrowings 15(b) 277.79 44.88 Trade payables 19 2,236.93 1,703.14 Other financial liabilities 16(b) 384.03 620.52 Other current liabilities 18(b) 260.78 204.38 Provisions 17(b) 202.88 108.96 Total current liabilities 3,362.41 2,681.88 TOTAL EQUITY AND LIABILITIES 19,938.49 14,860.66 Significant accounting policies 3 The accompanying notes are an integral part of these financial statements. As per our report of even date attached for Deloitte Haskins & Sells LLP for and on behalf of the Board of Directors of Chartered Accountants Narayana Hrudayalaya Limited V.Balaji Dr. Ashutosh Raghuvanshi Viren Shetty Partner Managing Director Whole -time Director DIN: 02775637 DIN: 02144586 Kesavan Venugopalan Sridhar S Chief Financial Officer Company Secretary Place: Bengaluru Place: Bengaluru Date: 29 May 2018 Date: 29 May 2018 108 Narayana Hrudayalaya Limited Statement of Profit and Loss (` in million) For the year ended For the year ended Particulars Note No. 31 March 2018 31 March 2017 INCOME Revenue from operations 20 18,475.75 16,459.15 Other income 21 186.38 181.46 Total income (A) 18,662.13 16,640.61 EXPENSES Purchase of medical consumables, drugs and surgical equipments 4,634.54 3,865.51 Changes in inventories of medical consumables, drugs and surgical equipments- 22 (70.42) 4.73 (Increase)/ Decrease Employee benefits expense 23 3,688.60 3,298.30 Professional fees to doctors 3,917.11 3,274.17 Other expenses 24 4,549.34 3,892.58 Expenses before finance costs, depreciation and amortisation and exceptional 16,719.17 14,335.29 items (B) Earnings before finance costs, depreciation and amortisation, exceptional 1,942.96 2,305.32 items and tax ( A- B) Finance costs ( C) 25 196.75 118.08 Depreciation and amortisation expense (D) 26 780.49 682.06 Total expenses (E) = (B+C+D) 17,696.41 15,135.43 Profit before exceptional items and tax (F) = (A-E) 965.72 1,505.18 Exceptional items (G) 40 11.58 31.91 Profit before tax (H) = (F-G) 954.14 1,473.27 Tax expense: Current tax 219.78 509.19 Add : MAT credit entitlement (219.78) - Deferred tax charge / (credit) 369.92 12.99 Total tax expense (I) 369.92 522.18 Profit for the year (J) = (H-I) 584.22 951.09 Other comprehensive income (OCI) Items that will not be reclassified subsequently to profit or loss Re-measurement of defined benefit plans 4.35 5.76 Income tax effect (1.51) (1.96) Items that will be reclassified subsequently to profit or loss Effective portion of gains/ (losses) in cash flow hedge (11.39) - Income tax effect 3.94 - Other comprehensive income for the year, net of income tax (K) (4.61) 3.80 Total comprehensive income for the year (J+K) 579.61 954.89 Earnings per share 36 Basic (`) 2.88 4.70 Diluted (`) 2.88 4.69 Significant accounting policies 3 The accompanying notes are an integral part of these standalone financial statements. As per our report of even date attached for Deloitte Haskins & Sells LLP for and on behalf of the Board of Directors of Chartered Accountants Narayana Hrudayalaya Limited V.Balaji Dr. Ashutosh Raghuvanshi Viren Shetty Partner Managing Director Whole -time Director DIN: 02775637 DIN: 02144586 Kesavan Venugopalan Sridhar S Chief Financial Officer Company Secretary Place: Bengaluru Place: Bengaluru Date: 29 May 2018 Date: 29 May 2018 Annual Report 2017-18 109 Company Overview Statutory Reports Financial Statements Statement of Cash Flow (` in million) For the year ended For the year ended Particulars 31 March 2018 31 March 2017 Cash flow from operating activities Profit before tax 954.14 1,473.27 Adjustments : Depreciation and amortisation 780.49 682.06 Provision for other than temporary diminution in long-term investments - 3.43 Provision for loss allowance 72.50 (59.24) Bad debts written off 4.30 121.90 Provision of inventories for write-down to net realisable value 3.21 (0.55) Interest income (22.95) (42.90) Finance costs 196.75 118.08 Share based payment expenses 42.01 58.73 Guarantee comission income (3.52) - Government grant income (13.97) (16.26) Assets / Capital-work-in-progress written off - 26.78 Loss on sale of fixed assets 14.55 13.60 Profit on sale of investment (3.10) (5.11) Exceptional items 11.58 31.91 Unrealised foreign exchange gain (net) (4.55) (3.95) Operating cash flow before working capital changes 2,031.44 2,401.75 Changes in trade receivables (550.00) (56.67) Changes in inventories (73.63) (3.13) Changes in loans, other financial assets and other assets 138.88 4.34 Changes in trade payables and other financials liabilities 609.14 161.92 Changes in provision 89.80 23.26 Cash generated from operations 2,245.63 2,531.47 Income taxes paid (net of refund) (305.28) (348.50) Net cash generated from operating activities (A) 1,940.35 2,182.97 Cash flow from investing activities Acquisition of property, plant and equipment (1,882.79) (1,257.19) Proceeds from slump sale (refer note 40 (B)) - 155.70 Proceeds from sale of property, plant and equipment 11.40 7.41 Investment in equity shares of subsidiaries (including share application (2,065.38) (253.52) money) Proceeds from sale of investment in subsidiaries [refer note 38 & 40(A)] 14.87 3.83 Payment towards acquisition of business (refer note 41) (756.40) - Proceeds from refund of share application money - 1.81 Unsecured loan given to related parties - (150.28) Proceeds from repayment of loan by a related party 150.28 - Purchase of mutual fund (2,465.00) (2,730.00) Proceeds from sale of mutual fund 2,468.10 2,535.11 Investment in bank deposit (2.53) (269.67) Realisation of bank deposit 63.36 295.24 Interest received 22.43 42.31 Net cash (used in) investing activities (B) (4,441.66) (1,619.25) 110 Narayana Hrudayalaya Limited Statement of Cash Flow (Contd.) (` in million) For the year ended For the year ended Particulars 31 March 2018 31 March 2017 Cash flow from financing activities Proceeds from long-term borrowings 2,781.33 200.00 Repayment of long-term borrowings (280.89) (198.06) Repayment of commercial papers (500.00) (200.00) Proceeds from commercial papers 500.00 - Proceeds from exercise of share options 0.54 0.32 Interest and other borrowing costs (241.93) (118.59) Net cash (used in) / generated from financing activities (C) 2,259.05 (316.33) Net increase in cash and cash equivalents (A+B+C) (242.26) 247.39 Cash and cash equivalents at the beginning of the year (refer note 12)* 162.11 (86.02) Add: Cash and cash equivalents at the beginning of the year pertaining to entities 2.94 - acquired during the year Effects of exchange gain on restatement of foreign currency cash and cash - 0.74 equivalent Cash and cash equivalents at the end of the year (refer note 12) (77.21) 162.11 * Cash and cash equivalents includes bank overdrafts that are repayable on demand and form an integral part of the Company’s cash management. The accompanying notes are an integral part of these financial statements. As per our report of even date attached for Deloitte Haskins & Sells LLP for and on behalf of the Board of Directors of Chartered Accountants Narayana Hrudayalaya Limited V.Balaji Dr. Ashutosh Raghuvanshi Viren Shetty Partner Managing Director Whole -time Director DIN: 02775637 DIN: 02144586 Kesavan Venugopalan Sridhar S Chief Financial Officer Company Secretary Place: Bengaluru Place: Bengaluru Date: 29 May 2018 Date: 29 May 2018 Annual Report 2017-18 111 Company Overview Statutory Reports Financial Statements 3.80 0.32 58.73 equity 951.09 954.89 7,527.17 Total other Total ( ` in million) - - - 3.80 3.80 (5.71) benefit Plans Remeasurements of the net defined ------Items of OCI - - hedge reserve Effective portion of Cash flow Amount 2,043.61 2,043.61 2,043.61 - - - 951.09 951.09 earnings Retained 2,366.89 ------250.00 Reserve General ( ` in million, except no. of shares) 204,360,804 204,360,804 - - - - 204,360,804 No. of Shares 39) 58.73 Share 33.61 options (refer note outstanding - - - - 0.32 (20.40) Shares Treasury Treasury Reserves and Surplus - - - - - Reserve Premium 4,901.24 Securities - - - - - 1.54 Capital Reserve ` 10 each issued, subscribed and fully paid up Other equity Equity share capital Balance at 1 April 2016 Profit for the year Balance as at 31 March 2018 Other comprehensive income (OCI) (net of tax) Balance as at 31 March 2017 Changes in equity share capital during 2017-18 (refer note 13) Transaction recorded directly in equity Transaction Exercise of share options Particulars for the income comprehensive Total year Particulars Equity shares of Balance as at 1 April 2016 Changes in equity share capital during 2016-17 (refer note 13) Share-based payments (b) Statement of Changes in Equity (a) 112 Narayana Hrudayalaya Limited 0.54 (4.61) 42.01 equity 584.22 579.61 8,541.11 9,163.27 Total other Total ( ` in million) - - - 2.84 2.84 0.93 (1.91) benefit Plans Remeasurements of the net defined - - - - Items of OCI (7.45) (7.45) (7.45) hedge reserve Effective portion of Cash flow Viren Shetty Viren Whole -time Director 02144586 DIN: Sridhar S Company Secretary - - - 584.22 584.22 earnings Retained 3,317.98 3,902.20 - - - - - 250.00 250.00 Reserve General - - - - 39) 42.01 Share 92.34 134.35 options (refer note outstanding - - - - 0.54 (20.08) (19.54) Shares Managing Director 02775637 DIN: Venugopalan Kesavan Chief Financial Officer Place: Bengaluru Date: 29 May 2018 for and on behalf of the Board Directors Narayana Hrudayalaya Limited Ashutosh Raghuvanshi Dr. Treasury Treasury Reserves and Surplus - - - - - Reserve Premium 4,901.24 4,901.24 Securities - - - - - 1.54 1.54 Capital Reserve Partner Place: Bengaluru Date: 29 May 2018 As per our report of even date attached for Deloitte Haskins & Sells LLP Chartered Accountants V.Balaji V.Balaji Balance as at 31 March 2017 Profit for the year Other comprehensive income (OCI) (net of tax) Total comprehensive income for the income comprehensive Total year recorded directly in equity Transaction Exercise of share options Particulars Share-based payments Balance as at 31 March 2018 The accompanying notes are an integral part of these standalone financial statements. Annual Report 2017-18 113 Company Overview Statutory Reports Financial Statements Notes to the standalone financial statements for the year ended 31 March 2018 1. Company overview amounts are presented in ` in million, except share data Narayana Hrudayalaya Limited (‘the Company’) was and per share data, unless otherwise stated. incorporated on 19 July 2000 under the Companies Act, 1956. The Company, headquartered in Bengaluru is 2.3. Basis of measurement engaged in providing economical healthcare services. The financial statements have been prepared on the The Company was rebranded as ‘Narayana Health’ in historical cost basis except for the following items: 2013. It has a network of multispecialty and superspeciality hospitals spread across multiple locations. The Company Items Measurement basis owns and operates certain hospitals and also enters into Certain financial Fair value management agreements with hospitals under which the assets and liabilities Company acquires the operating control of the hospitals. Net defined benefit Fair value of plan assets less present (asset)/ liability value of defined benefit obligations During the year ended 31 March 2016, the Company completed the Initial Public Offering (IPO) through an offer 2.4. Use of estimates and judgments for sale by existing shareholders to the extent of 24,523,297 In preparing these financial statements, management has equity shares of face value of ` 10 each for a cash price of made judgements, estimates and assumptions that affect ` 250 per equity share including a premium of ` 240 the application of accounting policies and the reported per equity share, of 6,287,978 equity shares by Ashoka amounts of assets, liabilities, income and expenses. Actual Investment Holding Limited, 1,886,455 equity shares results may differ from these estimates. by Ambadevi Mauritius Holdings Limited, 12,261,648 Estimates and underlying assumptions are reviewed on equity shares by JP Morgan Mauritius Holding IV Limited, an ongoing basis. Revisions to accounting estimates are 2,043,608 equity shares by Dr. Devi Prasad Shetty and 2,043,608 equity shares by Shakuntala Shetty aggregating recognized prospectively. to ` 6,130.82 million and equity shares of the Company Judgments were listed on the BSE Limited and the National Stock Information about judgments made in applying accounting Exchange of India Limited on 6 January 2016. policies that have the most significant effects on the amounts recognized in the financial statements is included 2. Basis of preparation of the financial statements in the following notes: 2.1. Statement of compliance The financial statements have been prepared in Note 35 - Leases and lease classification; accordance of Indian Accounting Standards (Ind AS) as Note 27 - Assessment of contingent liabilities and per the Companies (Indian Accounting Standards) Rules commitments 2015 notified under Section 133 of Companies Act 2013 (the ‘Act’) and other relevant provisions of the Act. Note 44 - Financial instruments Note 39 - Share based payments The Financial Statements for the company for the year Assumptions and estimation uncertainties ended 31 March 2017, were audited by the BSR & Co. Information about assumptions and estimation LLP. (Firm’s registration number: 101248W/W-100022) the predecessor auditor. uncertainties that have significant risk of resulting in a material adjustment in the year ending 31 March 2018 is included in the following notes: The financial statements were authorized for issue by the Company’s Board of Directors on 29 May 2018. Note 37- recognition of deferred tax assets Note 32 - measurement of defined benefit obligation; key Details of the accounting policies are included in Note 3. actuarial assumptions 2.2. Functional and presentation currency Note 27- recognition and measurement of contingencies; These financial statements are presented in Indian Rupees key assumptions about the likelihood and magnitude of (`), which is also the Company’s functional currency. All outflow of resources. 114 Narayana Hrudayalaya Limited Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) Note 4 - useful life of property, plant and equipment and A financial asset or financial liability is initially intangible assets measured at fair value plus, for an item not at fair value through profit and loss (FVTPL), transaction costs that Note 5 to 7, 11, 12 and 44 - recognition of impairment of are directly attributable to its acquisition or issue. financial assets 2.5. Measurement of fair values b. Classification and subsequent measurement A number of the Company’s accounting policies and Financial assets disclosures require the measurement of fair values, for both On initial recognition, a financial asset is classified as financial and non-financial assets and liabilities. measured at Fair values are categorized into different levels in a fair − amortised cost; value hierarchy based on the inputs used in the valuation − FVTPL techniques as follows: Financial assets are not reclassified subsequent to − Level 1: quoted prices (unadjusted) in active markets their initial recognition, except if and in the period the for identical assets or liabilities. Company changes its business model for managing − Level 2: inputs other than quoted prices included in financial assets. Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived A financial asset is measured at amortised cost if from prices). it meets both of the following conditions and is not designated as at FVTPL: − Level 3: inputs for the asset or liability that are not based on observable market data (unobservable − the asset is held within a business model whose inputs). objective is to hold assets to collect contractual cash flows; and When measuring the fair value of an asset or a liability, the − the contractual terms of the financial asset give Company uses observable market data as far as possible. rise on specified dates to cash flows that are If the inputs used to measure the fair value of an asset or solely payments of principal and interest on the a liability fall into different levels of the fair value hierarchy, principal amount outstanding. then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest All financial assets not classified as measured at level input that is significant to the entire measurement. amortised cost as described above are measured at FVTPL. On initial recognition, the Company may The Company recognizes transfers between levels of the irrevocably designate a financial asset that otherwise fair value hierarchy at the end of the reporting period during meets the requirements to be measured at amortised which the change has occurred. Further information about cost at FVTPL if doing so eliminates or significantly the assumptions made in measuring fair values is included reduces an accounting mismatch that would otherwise in the following notes: arise. Note 44 – financial instruments; Financial assets: Business model assessment Note 39 – share based payments; The Company makes an assessment of the objective of the business model in which a financial asset is held 3. Significant accounting polices at a portfolio level because this best reflects the way 3.1. Financial instruments the business is managed and information is provided to a. Recognition and initial measurement management. The information considered includes: Trade receivables and debt securities issued are − the stated policies and objectives for the portfolio initially recognised when they are originated. All other and the operation of those policies in practice. These financial assets and financial liabilities are initially include whether management’s strategy focuses on recognised when the Company becomes a party to earning contractual interest income, maintaining a the contractual provisions of the instrument. particular interest rate profile, matching the duration Annual Report 2017-18 115 Company Overview Statutory Reports Financial Statements Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) of the financial assets to the duration of any related − terms that may adjust the contractual coupon rate, liabilities or expected cash outflows or realising cash including variable interest rate features; flows through the sale of the assets; − prepayment and extension features; and − how the performance of the portfolio is evaluated and − terms that limit the Company’s claim to cash flows reported to the Company’s management; from specified assets (e.g. non‑ recourse features). A prepayment feature is consistent with the solely payments − the risks that affect the performance of the business of principal and interest criterion if the prepayment amount model (and the financial assets held within that substantially represents unpaid amounts of principal and business model) and how those risks are managed; interest on the principal amount outstanding, which may include reasonable additional compensation for early − how managers of the business are compensated – termination of the contract. Additionally, for a financial e.g. whether compensation is based on the fair value asset acquired at a significant discount or premium to its of the assets managed or the contractual cash flows contractual par amount, a feature that permits or requires collected; and prepayment at an amount that substantially represents the contractual par amount plus accrued (but unpaid) − the frequency, volume and timing of sales of financial assets in prior periods, the reasons for such sales and contractual interest (which may also include reasonable expectations about future sales activity. additional compensation for early termination) is treated as consistent with this criterion if the fair value of the Transfers of financial assets to third parties in transactions prepayment feature is insignificant at initial recognition. that do not qualify for derecognition are not considered Financial assets: Subsequent measurement and sales for this purpose, consistent with the Company’s gains and losses continuing recognition of the assets. Financial These assets are subsequently Financial assets that are held for trading or are managed assets at measured at fair value. Net gains and and whose performance is evaluated on a fair value basis FVTPL losses, including any interest or dividend are measured at FVTPL. income, are recognised in profit or loss. Financial These assets are subsequently Financial assets: Assessment whether contractual assets at measured at amortised cost using the cash flows are solely payments of principal and amortised cost effective interest method. The amortised interest cost is reduced by impairment losses. For the purposes of this assessment, ‘principal’ is defined Interest income, foreign exchange as the fair value of the financial asset on initial recognition. gains and losses and impairment are ‘Interest’ is defined as consideration for the time value of recognised in profit or loss. Any gain or money and for the credit risk associated with the principal loss on derecognition is recognised in amount outstanding during a particular period of time and profit or loss. for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin. Financial liabilities: Classification, subsequent measurement and gains and losses In assessing whether the contractual cash flows are solely Financial liabilities are classified as measured at amortised payments of principal and interest, the Company considers cost represented by borrowings, trade and other payables the contractual terms of the instrument. This includes are initially recognized at fair value, and subsequently assessing whether the financial asset contains a contractual carried at amortized cost using the effective interest rate term that could change the timing or amount of contractual method. cash flows such that it would not meet this condition. In making this assessment, the Company considers: Derivative financial instruments Hedge accounting − contingent events that would change the amount or The Company uses derivative financial instruments to timing of cash flows; manage risks associated with interest rate fluctuations relating to foreign currency loan taken by the Company. 116 Narayana Hrudayalaya Limited Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) Derivatives are recognised and measured at fair value issued by the Company are measured at their applicable Attributable transaction costs are recognised in statement fair values. of profit and loss. c. Derecognition Cash flow hedges: Financial assets The Company uses derivative financial instruments to The Company derecognises a financial asset when the manage risks associated with interest rate fluctuations contractual rights to the cash flows from the financial relating to foreign currency loan taken by the company. asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which The Company has designated derivative financial substantially all of the risks and rewards of ownership instruments taken for interest rate as ‘cash flow’ hedges of the financial asset are transferred or in which the relating to foreign currency loan taken by the company. Company neither transfers nor retains substantially all of the risks and rewards of ownership and does not The use of derivative financial instruments is governed retain control of the financial asset. by the Company’s policies approved by the Board of If the Company enters into transactions whereby it Directors, which provide written principles on the use transfers assets recognised on its balance sheet, but of such instruments consistent with the Company’s risk retains either all or substantially all of the risks and management strategy. rewards of the transferred assets, the transferred assets are not derecognised. The effective portion of changes in the fair value of derivatives that are designated and qualify as cashflow Financial liabilities hedges is recognised in other comprehensive income The Company derecognises a financial liability and accumulated under the heading of cash flow hedging when its contractual obligations are discharged or reserve. The gain or loss relating to the ineffective portion is cancelled, or expire. recognised immediately in statement of profit or loss, The Company also derecognises a financial liability when its terms are modified and the cash flows under Hedge accounting is discontinued when the hedging the modified terms are substantially different. In this instrument expires or is sold, terminated, or exercised, or case, a new financial liability based on the modified when it no longer qualifies for hedge accounting. Any gain terms is recognised at fair value. The difference or loss recognised in other comprehensive income and between the carrying amount of the financial liability accumulated in equity at that time remains in equity and extinguished and the new financial liability with is recognized when the forecast transaction is ultimately modified terms is recognised in profit or loss. recognised in profit or loss. When a forecast transaction is d. Offsetting no longer expected to occur, the gain or loss accumulated Financial assets and financial liabilities are offset in equity is recognised immediately in the statement of and the net amount presented in the balance sheet profit and loss. when and only when, the Company has a legally enforceable right to set off the amounts and it intends Others: either to settle them on a net basis or to realise the Changes in fair value of foreign currency derivative asset and settle the liability simultaneously. instruments not designated as cash flow hedges and the ineffective portion of cash flow hedges are recognized in 3.2. Inventories the statement of profit and loss and reported within foreign The inventories of medical consumables, drugs and exchange gains/ (losses). surgical equipment’s are valued at lower of cost or net realizable value. In the absence of any further estimated Financial Guarantee Contracts costs of completion and estimated costs necessary to A financial guarantee contract is a contract that requires make the sale, the net realizable value is the selling price. the issuer to make specified payments to reimburse the The comparison of cost and net realizable is made on an holder for a loss it incurs because the beneficiary fails to item by item basis. Cost of these inventories comprises of make payments when due in accordance with the terms all costs of purchase and other costs incurred in bringing of a debt instrument. Financial guarantee contracts the inventories to their present location after adjusting for Annual Report 2017-18 117 Company Overview Statutory Reports Financial Statements Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) Goods and Service Tax wherever applicable, applying the The Company has entered into management agreements first in first out method. with certain trusts, under which, the Company has a right over the management, operation and utilisation of 3.3. Cash and cash equivalents hospital facilities owned by the trusts. As a consideration Cash and cash equivalents comprise cash at bank and on towards the aforesaid arrangement, the Company is hand and short-term deposits with an original maturity of obligated to offer discounts to patients nominated by three months or less which are subject to insignificant risk the trusts at free of cost/ concession as per the terms of changes in value. of the agreement. The discounts thus offered have been recognised as revenue with a corresponding charge to 3.4. Treasury Shares rent expense. The Company has created an Employee Benefit Trust (EBT) for providing share based payment to its employees. The ‘Unbilled revenue’ represents value to the extent of medical Company treats EBT as its extension and shares held by and healthcare services rendered to the patients who EBT are treated as treasury shares. are undergoing treatment/ observation on the balance sheet date and is not billed as at the balance sheet Own equity instruments that are acquired (treasury shares) date. ’Unearned revenue’ comprises billings in excess of are recognized at cost and deducted from equity. When the earnings. treasury shares are issued to the employees by EBT, the amount received is recognized as an increase in equity and Income from patient’s amenities is recognized on accrual the resultant gain / (loss) is transferred to / from securities basis as and when services are rendered. premium. Interest 3.5. Cash flow statement For all debt instruments measured at amortized cost, Cash flows are reported using the indirect method, interest income is recorded using the effective interest rate whereby net profit before tax is adjusted for the effects (EIR). EIR is the rate that exactly discounts the estimated of transactions of a non-cash nature and any deferrals future cash payments or receipts over the expected or accruals of past or future cash receipts or payments. life of the financial instrument or a shorter period, where The cash flows from operating, investing and financing appropriate, to the gross carrying amount of the financial activities of the Company are segregated. Bank overdrafts asset or to the amortized cost of a financial liability. are classified as part of cash and cash equivalents, as they When calculating the effective interest rate, the Company form an integral part of an entity’s cash management. estimates the expected cash flows by considering all the contractual terms of the financial instrument (for example, 3.6. Revenue recognition prepayment, extension, call and similar options) but does Revenue from operations not consider the expected credit losses. Interest income is Revenue from medical and healthcare services to patients included in finance income in the statement of profit and is recognised as revenue when the related services are loss. rendered unless significant future uncertainties exist. Revenue is also recognised in relation to the services Dividend rendered to the patients who are undergoing treatment/ Dividend income is recognised when the Company’s right observation on the balance sheet date to the extent of to receive dividend is established. services rendered. Other Healthcare Services Revenue is recognised net of discounts given to the patients. Revenue is recognized on pro-rata basis on the completion Revenue from sale of medical consumables and drugs of such services over the duration of the program. within the hospital premises is recognised when property in the goods or all significant risks and rewards of 3.7. Property, Plant and Equipment their ownership are transferred to the customer and no Recognition and measurement significant uncertainty exists regarding the amount of the Property, plant and equipment are measured at cost which consideration that will be derived from the sale of the goods includes capitalized borrowing costs, less accumulated and regarding its collection. depreciation and impairment losses, if any. The cost of 118 Narayana Hrudayalaya Limited Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) an item of Property, Plant and Equipment comprises its loss. Amounts paid towards the acquisition of property, purchase price, including import duties and other non- plant and equipment outstanding as of each reporting refundable taxes or levies, freight, any directly attributable date are recognized as capital advance and the cost of cost of bringing the asset to its working condition for its property, plant and equipment not ready for intended intended use and estimated cost of dismantling and use before such date are disclosed under capital work- restoring onsite; any trade discounts and rebates are in-progress. deducted in arriving at the purchase price. Subsequent expenditures related to an item of tangible fixed asset are 3.8. Business combination Goodwill and other added to its book value only if they increase the future intangible assets benefits from the existing asset beyond its previously Business combination assessed standard of performance. Cost includes Business combinations are accounted for using the expenditures directly attributable to the acquisition of the purchase (acquisition) method. The cost of an acquisition asset. is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at Depreciation and amortization the date of exchange. The cost of acquisition also includes The Company depreciates property, plant and equipment the fair value of any contingent consideration. Identifiable over the estimated useful life on a straight-line basis from assets acquired and liabilities and contingent liabilities the date the assets are ready for intended use. Assets assumed in a business combination are measured initially acquired under finance lease and leasehold improvements at their fair value on the date of acquisition. are amortized over the lower of estimated useful life and Transaction costs incurred in connection with a business lease term. Freehold land is not depreciated. The estimated combination are expensed as incurred. useful lives of assets for the current and comparative period of significant items of property, plant and equipment are as Intangible assets follows: Intangible assets are stated at cost less accumulated amortization and impairment. Intangible assets are amortized Block of assets Useful life over their respective estimated useful lives on a straight- Building 60 years line basis, from the date that they are available for use. Electrical installation 10 years Medical equipment 13 years Amortisation Office equipment 5 years The estimated useful life of an identifiable intangible asset Other equipment including air conditioners 15 years is based on a number of factors including the effects of Furniture and fixtures 10 years obsolescence, demand, competition and other economic Computers 3 years factors (such as the stability of the industry and known technological advances) and the level of maintenance Vehicles 5 years expenditures required to obtain the expected future cash Depreciation methods, useful lives and residual values flows from the asset. are reviewed at each financial year-end and adjusted The estimated useful lives of intangibles are as follows: appropriately. Block of assets Useful life The Company believes that the useful life as given above Computer software 3 years best represent the useful life of the assets based on the internal technical assessment and these useful life are as Amortisation method prescribed under Part C of Schedule II of the Companies Useful life and residual values are reviewed at the end of Act, 2013 except vehicles where useful life considered by each financial year. management is lower. Goodwill The cost and related accumulated depreciation are Goodwill is measured as the excess of the sum of the eliminated from the financial statements upon sale consideration transferred, over the net of the acquisition or disposition of the asset and the resultant gains or date amounts of the identifiable assets acquired and the losses are recognized in the statement of profit and liabilities assumed. Annual Report 2017-18 119 Company Overview Statutory Reports Financial Statements Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) In case of a bargain purchase, before recognising a gain Post-employment benefits in respect thereof, the Company determines whether Defined contribution plans there exists clear evidence of the underlying reasons A defined contribution plan is a post-employment benefit for classifying the business combination as a bargain plan under which an entity pays specified contributions to purchase. Thereafter, the Company reassesses whether it separate entity and has no obligation to pay any further has correctly identified all of the assets acquired and all amounts. The Company makes specified obligations of the liabilities assumed and recognises any additional towards employee provident fund and employee state assets or liabilities that are identified in that reassessment. insurance to Government administered provident fund The Company then reviews the procedures used to scheme and ESI scheme which is a defined contribution measure the amounts that Ind AS requires for the purposes plan. The Company’s contributions are recognized as of calculating the bargain purchase. If the gain remains after an expense in the statement of profit and loss during the this reassessment and review, the Company recognises period in which the employee renders the related service. it in other comprehensive income and accumulates the same in equity as capital reserve. This gain is attributed Defined benefit plans to the acquirer. If there does not exist clear evidence of the The Company’s gratuity benefit scheme is a defined benefit underlying reasons for classifying the business combination plan. The Company’s net obligation in respect of a defined as a bargain purchase, the Company recognises the gain, benefit plan is calculated by estimating the amount of after reassessing and reviewing (as described above), future benefit that employees have earned and returned directly in equity as capital reserve. for services in the current and prior periods; that benefit is discounted to determine its present value. The calculation 3.9. Investment in subsidiaries of Company’s obligation under the plan is performed Investment in subsidiaries is measured at cost. Dividend periodically by a qualified actuary using the projected unit income from subsidiaries is recognized when its right to credit method. receive the dividend is established. The gratuity scheme is administered by third party. Re- 3.10. Government grants measurements of the net defined benefit liability, which Government grants including non-monetary grants are comprise actuarial gains and losses, the return on plan recognized where there is reasonable assurance that the assets (excluding interest) and the effect of the asset ceiling grant will be received and all attached conditions will be (if any, excluding interest), are recognised immediately complied with. in other comprehensive income (OCI). The Company Government grants are recognised in Statement of profit determines the net interest expense (income) on the net and loss on a systematic basis over the periods in which defined liability (assets) for the period by applying the the related costs, for which the grants are intended to discount rate used to measure the net defined obligation at compensate, are recognized as expenses. the beginning of the annual period to the then-net defined benefit liability (asset), taking into account any changes as Government grants related to assets are presented at fair a result of contribution and benefit payments. Net interest value by setting up the grant as a deferred income. expense and other expenses related to defined benefit plans are recognized in the statement of profit and loss. The 3.11. Employee benefits Company recognizes gains and losses in the curtailment or Short term employee benefits settlement of a defined benefit plan when the curtailment or Employee benefits payable wholly within twelve months of settlement occurs. receiving services are classified as short-term employee benefits. These benefits include salary and wages, bonus When the benefits of a plan are changed or when a plan and exgratia. The undiscounted amount of short-term is curtailed, the resulting change in benefit that relates to employee benefits to be paid in exchange for employee past service or the gain or loss on curtailment is recognised services is recognized as an expense as the related service immediately in the statement of profit and loss. is rendered by the employees. Compensated absences The employees can carry-forward a portion of the unutilized accrued compensated absences and utilize it 120 Narayana Hrudayalaya Limited Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) in future service periods or receive cash compensation The Company has entered into management agreements on termination of employment. Since the employee has with certain trusts, under which, the Company has a right unconditional right to avail the leave, the benefit is classified over the management, operation and utilisation of hospital as a short term employee benefit. The Company records an facilities owned by the trusts. As a consideration towards obligation for such compensated absences in the period the aforesaid arrangement, the Company is obligated to in which the employee renders the services that increase offer discounts to patients nominated by the trusts at free this entitlement. The obligation is measured on the basis of cost/ concession as per the terms of the agreement. The of independent actuarial valuation using the projected unit discounts thus offered have been recognised as revenue credit method. with a corresponding charge to rent expense. Employee Stock Option Plan (ESOP) Further, at the inception of above arrangement, the The grant date fair value of equity settled share-based Company determines whether the above arrangement payment awards granted to employees is recognized as is or contains a lease. At inception or on reassessment an employee expense, with a corresponding increase in of an arrangement that contains a lease, the Company equity, over the period that the employees unconditionally separates a payments and other consideration required become entitled to the awards. The amount recognized as by the arrangement into those for the lease and those for expense is based on the estimate of the number of awards other elements on the basis of their relative fair values. for which the related service are expected to be met, such If the Company concludes for a finance lease that it is that the amount ultimately recognized as an expense is impracticable to separate the payments reliably, then an based on the number of awards that do meet the related asset and a liability are recognised at an amount equal service conditions at the vesting date. to the fair value of the underlying asset; subsequently, the liability is reduced as payments are made and an 3.12. Borrowing cost imputed finance cost on the liability is recognized using the Borrowing costs are interest and other costs (including Company’s incremental borrowing rate. exchange differences relating to foreign currency borrowings to the extent that they are regarded as an Minimum lease payments made under finance leases are adjustment to interest costs) incurred in connection apportioned between the finance charge and the reduction with the borrowing of funds. Borrowing costs directly of the outstanding liability. The finance charge is allocated attributable to acquisition or construction of an asset which to each period during the lease term so as to produce a necessarily take a substantial period of time to get ready constant periodic rate of interest on the remaining balance for their intended use are capitalized as part of the cost of the liability. of that asset. Other borrowing costs are recognized as an expense in the period in which they are incurred. 3.14. Earnings per share The basic earnings per share is computed by dividing 3.13. Leases the net profit attributable to equity shareholders for the Leases under which the Company assumes substantially period by the weighted average number of equity shares all the risks and rewards of ownership are classified as outstanding during the year. finance leases. Such assets are capitalised at fair value of the asset or present value of the minimum lease payments Diluted earnings per share is computed by dividing the at the inception of the lease, whichever is lower. Assets held net profit attributable to equity shareholders for the year under leases that do not transfer substantially all the risks relating to the dilutive potential equity shares, by the and reward of ownership are not recognized in the balance weighted average number of equity shares considered sheet. for deriving basic earnings per share and the weighted average number of equity shares which could have been Lease payments under operating lease are generally issued on the conversion of all dilutive potential equity recognized as an expense in the statement of profit and shares. Potential equity shares are deemed to be dilutive loss on a straight line basis over the term of lease unless only if their conversion to equity shares would decrease the such payments are structured to increase in line with the net profit per share. expected general inflation to compensate for the lessor’s expected inflationary cost increases. Annual Report 2017-18 121 Company Overview Statutory Reports Financial Statements Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) 3.15. Income tax Minimum Alternative tax The Income-tax expense comprises current tax and According to Section 115JAA of the Income tax Act, 1961, deferred tax. It is recognized in profit and loss except to the Minimum Alternative Tax (MAT’) paid over and above the extent that is relates to an item recognized directly in equity normal Income tax in a subject year is eligible for carry or in other comprehensive income. forward for fifteen succeeding assessment year for set-off against normal Income tax liability. The MAT credit asset is Current income tax assessed against the entity’s normal income tax during the Current tax comprises the expected tax payable or specified period. receivable on the taxable income for the year and any adjustment to the tax payable or receivable in respect of 3.16. Foreign exchange transactions and translations previous years. The amount of current tax reflects the best Transactions in foreign currencies are recorded at prevailing estimate of the tax amount expected to be paid or received rate at the dates of the transactions. after considering the uncertainty, if any, related to income taxes. It is measured using tax rates (and tax laws) enacted Monetary assets and liabilities denominated in foreign or substantially enacted by the reporting dates. currencies are translated into the functional currency at the Current tax assets and current tax liabilities are offset only if exchange rate at the reporting date. Non-monetary assets there is a legally enforceable right to set off the recognized and liabilities that are measured at fair value in a foreign amounts, and it is intended to realize the assets and settle currency are translated into the functional currency at the the liability on a net basis or simultaneously. exchange rate when the fair value was determined. Non- monetary items that are measured based on historical cost Deferred tax in a foreign currency are translated at the exchange rate Deferred tax is recognized in respect of temporary at the date of the transaction. Foreign currency differences differences between carrying amounts of assets and are generally recognised in the statement of profit or loss. liabilities for financial reporting purposes and the corresponding amounts used for taxation purposes. 3.17. Impairment a. Impairment of financial instruments Deferred tax liabilities are recognized for all taxable The Company recognizes loss allowances for temporary differences. expected credit losses on financial assets measured The carrying amount of deferred tax assets is reviewed at at amortized cost; each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available At each reporting date, the Company assesses to allow all or part of the deferred tax asset to be utilized. whether financial assets carried at amortized cost and debt securities at fair value through other Deferred tax assets and liabilities are measured at the tax comprehensive income (FVOCI) are credit‑ impaired. rates that are expected to apply in the period when the A financial asset is ‘credit‑ impaired’ when one or asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively more events that have a detrimental impact on the enacted at the reporting date. estimated future cash flows of the financial asset have occurred. The measurement of deferred tax reflects the tax Evidence that a financial asset is credit‑ impaired consequences that would follow from the manner in which includes the following observable data: the Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. − significant financial difficulty of the borrower or issuer; Deferred tax assets and liabilities are offset if there is a − the restructuring of a loan or advance by the Company legally enforceable right to offset current tax liabilities and on terms that the Company would not consider assets, and they relate to income taxes levied by the same otherwise; tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and − it is probable that the borrower will enter bankruptcy or assets on a net basis or their tax assets and liabilities will other financial reorganization; or be realized simultaneously. 122 Narayana Hrudayalaya Limited Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) − the disappearance of an active market for a security contract and the cash flows that the Company expects to because of financial difficulties. receive). Presentation of allowance for expected credit losses in the The Company measures loss allowances at an amount balance sheet equal to lifetime expected credit losses, except for the following, which are measured as 12 month expected Loss allowances for financial assets measured at amortized credit losses: cost are deducted from the gross carrying amount of the assets. − debt securities that are determined to have low credit risk at the reporting date; and Write-off The gross carrying amount of a financial asset is written − other debt securities and bank balances for which off (either partially or in full) to the extent that there is no credit risk (i.e. the risk of default occurring over the realistic prospect of recovery. This is generally the case expected life of the financial instrument) has not when the Company determines that the trade receivable increased significantly since initial recognition. does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject Loss allowances for trade receivables are always measured to the write‑ off. However, financial assets that are written at an amount equal to lifetime expected credit losses. off could still be subject to enforcement activities in order to comply with the Company’s procedures for recovery of Lifetime expected credit losses are the expected credit amounts due. losses that result from all possible default events over the expected life of a financial instrument. b. Impairment of non-financial assets The Company’s non-financial assets, inventories and 12-month expected credit losses are the portion of deferred tax assets, are reviewed at each reporting expected credit losses that result from default events that date to determine whether there is any indication of are possible within 12 months after the reporting date (or a impairment. If any such indication exists, then the shorter period if the expected life of the instrument is less asset’s recoverable amount is estimated. than 12 months). For impairment testing, assets that do not generate In all cases, the maximum period considered when independent cash inflows are grouped together into estimating expected credit losses is the maximum cash-generating units (CGUs). Each CGU represents contractual period over which the Company is exposed to the smallest group of assets that generates cash credit risk. inflows that are largely independent of the cash inflows of other assets or CGUs. When determining whether the credit risk of a financial asset has increased significantly since initial recognition The recoverable amount of a CGU (or an individual and when estimating expected credit losses, the Company asset) is the higher of its value in use and its fair considers reasonable and supportable information that is value less costs to sell. Value in use is based on relevant and available without undue cost or effort. This the estimated future cash flows, discounted to their present value using a pre-tax discount rate that includes both reflects current market assessments of the time value quantitative and qualitative information and analysis, based of money and the risks specific to the CGU (or the on the Company’s historical experience and informed credit asset). assessment and including forward‑ looking information. The Company’s corporate assets do not generate Measurement of expected credit losses independent cash inflows. To determine impairment of a corporate asset, recoverable amount is determined Expected credit losses are a probability‑weighted estimate for the CGUs to which the corporate asset belongs. of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the An impairment loss is recognized if the carrying amount cash flows due to the Company in accordance with the of an asset or CGU exceeds its estimated recoverable Annual Report 2017-18 123 Company Overview Statutory Reports Financial Statements Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) amount. Impairment losses are recognized in the onerous contracts are measured at the present value of statement of profit and loss. lower of the expected net cost of fulfilling the contract and the expected cost of terminating the contract. 3.18. Segment Reporting Operating results are regularly reviewed by the Chief 3.21. Share issue expenses Operating Decision Maker (‘CODM’) who makes decisions Share issue expenses are adjusted against the securities about resources to be allocated to the segment and assess premium account as permissible under Section 52 of the its performance. Segment results that are reported to the Companies Act, 2013, to the extent any balance is available CODM include items directly attributable to a segment as for utilisation in the securities premium account. well as those that can be allocated on a reasonable basis. 3.22. New Standards and interpretation not yet 3.19. Non-current assets or disposal groups held for adopted sale IND AS 115, Revenue from contracts with customers: Non-current assets or disposal groups comprising assets On 28 March 2018, the Ministry of Corporate Affairs and liabilities are classified as held for sale if it is highly (“MCA”), notified Ind AS 115 “Revenue from Contracts with probable that they will be recovered primarily through sale Customers” as part of the Companies (Indian Accounting rather than through continuing use. Standards) Amendment Rules, 2018. The said standard is applicable for the accounting periods beginning on or after Such assets, or disposal groups, are generally measured April 1, 2018. The company is in the process of assessing at the lower of their carrying amount and fair value less the impact of the said standard on its financial statements. costs to sell. Losses on initial classification held for sale and subsequent gain and losses on re- measurement are Appendix B of Ind AS 21, Foreign currency transaction recognized in the statement of profit and loss. and advance consideration: On 28 March 2018, MCA has notified the Company ( Indian Accounting Standards) Once classified as held-for-sale, intangible assets, property, Amendment Rules, 2018 containing Appendix B to Ind AS plant and equipment and investment properties are no 21, Foreign currency transaction and advance consideration longer amortized or depreciated. which clarifies the date of the transaction for the purpose of determining the exchange rate to use on initial recognition 3.20. Provisions and contingencies of the related assets, expense or income, when an entity Provisions are recognized when the Company has a present has received or paid advance consideration in a foreign obligation (legal or constructive) as a result of a past event, currency. The amendment will come into force from 1 April it is probable that an outflow of economic benefits will be 2018. The company is in the process of assessing the required to settle the obligation, and a reliable estimate can impact of the said standard on its financial statements. be made of the amount of the obligation. The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognized as an asset, if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. Provisions for onerous contracts are recognized when the expected benefits to be derived by the Company from a contract are lower than the unavoidable costs of meeting the future obligations under the contract. Provisions for 124 Narayana Hrudayalaya Limited Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) - 9.94 2017 As at 25.90 57.00 30.19 25.90 877.87 352.85 261.33 936.25 311.74 672.74 355.53 173.98 515.74 2,759.27 6,798.69 7,340.33 31 March ( ` in million) Net block 9.66 2018 As at 74.24 71.34 68.40 74.24 949.29 352.85 254.70 335.50 837.59 423.02 178.91 204.44 303.61 2,198.92 3,769.99 9,654.61 31 March 10,032.46 - - 1.97 2018 As at 19.24 93.28 239.22 186.84 142.13 112.39 441.02 121.17 501.23 434.68 190.06 186.84 2,122.00 4,418.39 4,605.23 31 March ------ 0.19 0.39 0.30 0.17 0.44 23.29 24.78 24.78 Deletions - - 6.63 3.95 1.97 40.42 18.23 18.30 66.37 25.87 73.63 74.22 28.09 17.25 18.23 405.56 762.26 780.49 Amortisation Depreciation / - - - 2017 As at 94.09 95.69 15.29 76.03 1 April 168.61 198.80 135.50 374.84 427.90 360.63 162.41 Accumulated depreciation / amortisation 168.61 1,739.73 3,680.91 3,849.52 2018 As at 28.90 261.08 352.85 396.83 776.52 192.51 857.70 258.46 297.72 180.88 303.61 261.08 1,188.51 2,311.31 5,891.99 1,338.82 31 March 14,073.00 14,637.69 ------ 0.39 0.40 0.65 0.39 0.44 48.46 50.73 2,143.43 2,194.16 Deletions - - 3.67 66.57 90.33 40.22 66.30 47.71 66.57 111.84 238.83 141.93 180.88 Gross block 1,280.97 1,441.45 3,644.13 1,931.30 5,642.00 Additions / Adjustments - 2017 As at 25.23 1 April 194.51 352.85 396.83 686.58 152.69 716.16 192.60 250.01 515.74 194.51 1,076.67 1,030.34 4,499.00 1,100.64 10,479.60 11,189.85 (i) Property, plant and equipment, capital work-in-progress and intangible assets plant and equipment, capital work-in-progress (i) Property, Particulars Total tangible assets (A) Total Capital work-in-progress (B) Capital work-in-progress Intangible assets Computer software Total intangible assets (C) Total Tangible assets Tangible (i) Owned land (i) (ii) Freehold Building (ii) Building Electrical installation Grand total (A+B+C) Medical equipments Office equipments Other equipment including air conditioners Furniture and fixtures (viii) Furniture Computers Vehicles (viii) Vehicles (ii) Leasehold Leasehold land (viii) Leasehold improvements Building (iii) 4 Notes on 4(ii) to be referred here. Annual Report 2017-18 125 Company Overview Statutory Reports Financial Statements Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) 5.16 As at 31.81 26.95 62.90 26.95 885.69 174.71 348.41 370.87 877.12 270.00 637.17 355.83 127.31 2,450.84 6,470.51 6,624.77 ( ` in million) 31 March 2016 Net block 9.94 As at 30.19 25.90 57.00 25.90 877.87 173.98 311.74 355.53 936.25 261.33 672.74 352.85 515.74 2,759.27 6,798.69 7,340.33 31 March 2017 - - As at 15.29 76.03 94.09 95.69 198.80 374.84 360.63 162.41 168.61 135.50 427.90 168.61 1,739.73 3,680.91 3,849.52 31 March 2017 - - - - 0.47 0.53 6.46 1.94 0.72 0.29 0.25 0.15 0.15 2.86 0.25 13.57 13.82 Deletions - - 3.25 8.67 39.57 72.70 71.01 19.76 23.11 16.63 21.82 75.03 20.21 23.11 310.30 658.95 682.06 Amortisation ` 3,674.79 million) are subject to first charge secure bank loans. Depreciation/ - - 23.05 As at 11.33 (11.72) Accumulated depreciation / amortisation As at 18.50 77.61 74.02 55.82 159.70 304.08 290.34 142.94 145.75 126.83 355.73 145.75 1,429.96 3,035.53 3,181.28 ( ` in million) 15.79 million) has been capitalised through capital work-in progress. ` 15.79 million) has been capitalised through capital work-in 1 April 2016 31 March 2017 As at 25.23 686.58 152.69 716.16 192.60 250.01 194.51 352.85 396.83 515.74 194.51 1,076.67 1,030.34 4,499.00 1,100.64 10,479.60 11,189.85 ` 3,684.35 million (previous year: 9.32 23.05 As at 31 March 2017 (13.73) - 4.71 ` 59.47 million. 6.46 4.04 8.24 0.19 2.38 0.29 0.08 0.28 1.36 2.98 3.81 0.28 34.54 771.38 806.20 ` 51.35 million (previous year: Deletions 31 March 2018 - - 0.07 0.09 180.88 181.04 Gross block 8.03 Amount 35.99 79.65 42.33 15.96 57.33 18.14 19.56 22.09 22.09 619.56 111.55 1,159.81 1,008.10 2,190.00 ( ` in million) Additions As at 23.66 355.83 396.83 954.73 652.49 136.92 992.90 661.21 174.75 230.53 172.70 127.31 172.70 1,045.39 3,880.80 9,506.04 9,806.05 1 April 2016 (ii) Property, plant and equipment, capital work-in-progress and intangible assets plant and equipment, capital work-in-progress (ii) Property, During the financial year 2017-18, project salary cost amounting to plant and equipments with a carrying amount of As at 31 March 2018, property, During the year company has capitalised interest cost amounting to The Company as part of the amalgamation with NewRise Healthcare Private Limited acquired property, plant and equipments which is as below: The Company as part of the amalgamation with NewRise Healthcare Private Limited acquired property, includes land in possession and occupation of the Company to the extent of 9 acre 25 guntas out total 17 acres 44 in Bangalore allotted by Karnataka Industrial Areas Development extent includes land in possession Company to the and occupation of the Board (‘KIADB’) to the Company on lease cum sale basis for which is yet execute deed as at 31 March 2018. Promoters and Company, the ‘agreements’) signed in January 2008 between and Clause 3.1(d) of the Shareholders’ Agreement (together, Agreement 7.7 of the Investment pursuant to clause right, the of the land and building (‘NH land’) at no consideration to him. On exercise Company to transfer the the obligation to require right but not the Company had the Investors, a Promoter of the promoter was obligated to lease the asset to the Company for an initial term of 15 years with an extension of 10 years in accordance with the terms of the aforesaid agreements at no consideration. The said land and building was being amortized over a period of 25 years based on the Management’s estimate lease term for above arrangement. said right stated in Clause 3.1(d) of the the to exercise will not be entitled above right was waived off by him and accordingly he the Promoter, dated 26 November 2015 by the letter As per the Securities and from the final observation letter of the date of receipt from the year public offering within a period of one completion of the was subject to the The waiver Shareholders’ Agreement. The waiver was to be effective from the date of listing of the Company’s shares on the stock exchanges. To Exchange Board of India on the Draft Red Herring Prospectus filed by the Company. On the Company’s shares being listed on the Bombay Stock Exchange and this effect, the said Shareholders’ Agreement was amended and duly executed by all Shareholders of the Company. the National Stock Exchange on 6 January 2016, Promoter’s right to NH Land ceases exist thereof. Ahmedabad, Jaipur and Jamshedpur. represents the cost of construction building at the leasehold premises Kolkata, plant and equiments (Other than land building) of present As an arrangement with Modern Medical Institute for operating and maintaining Raipur Hospital, the Company received property, value ` 23.05 million. Intangible assets Computer software (b) Leasehold Capital work-in-progress (B) Capital work-in-progress Leasehold land and fixtures Furniture Vehicles Total Building (ii) Building Electrical installation Medical equipments Office equipments Other equipment including air conditioners and fixtures Furniture Computers Vehicles Leasehold improvements Building (iii) intangible assets (C) Total Grand total (A+B+C) Particulars Cost or deemed cost Particulars Accumulated depreciation Net carrying amount Total tangible assets (A) Total Tangible assets Tangible (a) Owned land (i) (ii) Freehold Particulars (v) (vi) (vii) (viii) 4 (i) (ii) (iii) (iv) 126 Narayana Hrudayalaya Limited Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) 5 Non-current investments (` in million) As at As at 31 March 2018 31 March 2017 Unquoted equity instruments Investment in equity shares In subsidiary company: Narayana Institute for Advanced Research Private Limited 57.60 57.60 [1,038,382 (previous year : 1,038,382) equity shares of ` 10 each fully paid up along with a premium of ` 45.47 per equity share] Narayana Hrudayalaya Surgical Hospital Private Limited 721.08 465.06 [19,134,500 (previous year : 16,952,704) equity shares of ` 10 each fully paid up along with a premium of ` 420.56 per equity share on 702,704 equity shares, ` 116.99 on 11,82,296 equity shares and ` 95.94 on 999,500 ] Narayana Hospitals Private Limited 532.61 532.61 [53,261,437 (previous year : 53,261,437) equity shares of ` 10 each fully paid up] Narayana Health Institutions Private Limited - - [1,104,035 (previous year : 1,104,035) equity shares of ` 10 each fully paid up] {Net of provision for other than temporary diminution ` 11.04 million (previous year : ` 11.04 million)} Narayana Cayman Holdings Limited 3,092.21 1,340.03 [48,956 (previous year 22,027) equity shares of USD 0.01 each fully paid up with a premium of USD 999.99 per share]* Narayana Hrudayalaya Hospitals Malaysia SDN. BHD. - 14.10 "[Nil (previous year : 2,585,136 ) equity shares of MYR 1 each fully paid up {Net of provision other than temporary diminution ` Nil (previous year: ` 36.38 million } (refer note 38) ] Meridian Medical Research & Hospital Limited 1,112.50 1,067.15 [28,766,947 ( previous year 27,740,647) equity shares of ` 10 each fully paid up with a premium of ` 28.75 per share on 16,717,070 equity shares, ` 28 per shares on 9,188,577 equity shares, ` 28.51 per share on 1,835,000 shares and ` 34.19 per share on 10,26,300 equity shares)] Narayana Vaishno Devi Specialty Hospitals Private Limited 10.00 10.00 [999,795 (previous year : 999,795) equity shares of ` 10 each fully paid up] Narayana Holdings Private Limited 50.41 50.41 [75,000 (previous year:75,000) equity shares of USD 10 each fully paid up] In associate: TriMedx India Private Limited - 3.00 [91,947 (previous year : 30,005) equity shares of ` 100 each fully paid up with a premium of ` 499.26 per share on 4770 equity shares ] Fair Value of guarantee in subsidiaries [refer note 31 (b)] 33.10 - 5,609.51 3,539.96 Aggregate value of unquoted investments 5,620.55 3,587.38 Aggregate amount of impairment in value of investments 11.04 47.42 Net investments 5,609.51 3,539.96 * Transfer/ sale of shares is subject to approval of Exim Bank, as loan is obtained to make investment in this subsidiary. Annual Report 2017-18 127 Company Overview Statutory Reports Financial Statements Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) 6 Loans (Unsecured, considered good unless otherwise stated) (` in million) As at As at 31 March 2018 31 March 2017 (a) Non-current To parties other than related parties Security deposits 147.16 114.40 Unsecured loan 13.00 - To related parties (refer note 29) Unsecured loan 20.00 20.00 Security deposits 274.18 250.17 454.34 384.57 (b) Current To parties other than related parties Security deposits 68.91 27.70 Unsecured loan 4.00 - To related parties (refer note 29) Unsecured loan - 150.28 72.91 177.98 7 Other financial assets (Unsecured, considered good unless otherwise stated) (` in million) As at As at 31 March 2018 31 March 2017 (a) Non-current To parties other than related parties Bank deposits (due to mature after 12 months from the reporting date) 0.50 0.55 Interest accrued but not due on fixed deposits 0.17 0.13 To related parties (refer note 29) Share application money pending allotment 32.52 29.27 33.19 29.95 (b) Current To parties other than related parties Interest accrued but not due on fixed deposits 1.88 4.36 Interest accrued on security deposit 3.91 2.84 Unbilled revenue 112.13 115.79 Others - 200.00 To related parties (refer note 29) Interest accrued on unsecured loan 5.75 3.85 Due for reimbursement of expenses 42.21 58.03 165.88 384.87 8 Income tax assets (net) (` in million) As at As at 31 March 2018 31 March 2017 Advance income tax and tax deducted at source (net of provisions) 205.15 119.72 Income-tax paid under protest 10.00 10.00 215.15 129.72 128 Narayana Hrudayalaya Limited Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) 9 Other assets (` in million) As at As at 31 March 2018 31 March 2017 (a) Non-current To parties other than related parties (Unsecured, considered good unless otherwise stated) Security deposits 40.60 30.00 Capital advances 35.12 3.90 Prepaid rent 99.96 97.44 Prepaid expenses 61.16 99.56 (Unsecured, considered doubtful) Prepaid rent 19.24 19.24 Less: provision for prepaid rent (19.24) (19.24) Prepaid rent (net) - - To related parties (refer note 29) Prepaid expenses (refer note 34) 218.33 234.18 Prepaid rent 92.30 118.21 547.47 583.29 (b) Current To parties other than related parties (Unsecured, considered good unless otherwise stated) Security deposits 3.91 - Balances with statutory/ government authorities 4.91 4.44 Advance to vendors 51.67 53.13 Other loans and advances 13.62 18.21 Prepaid rent 8.99 8.89 Other assets 0.20 - Prepaid expenses 107.19 50.09 (Unsecured, considered doubtful) Prepaid rent 0.24 0.24 Less: provision for prepaid rent (0.24) (0.24) Prepaid rent (net) - - To related parties (refer note 29) Prepaid expenses (refer note 34) 15.78 15.72 Prepaid rent 25.91 25.91 Due for reimbursement of expenses 5.56 21.49 237.74 197.88 10 Inventories (Valued at lower of cost and net realisable value) (` in million) As at As at 31 March 2018 31 March 2017 Medical consumables, drugs and surgical equipments 514.85 441.22 Less: Provision for write-down to net realisable value (10.05) (6.84) 504.80 434.38 The inventories are hypothecated as security as part of working capital facility. Annual Report 2017-18 129 Company Overview Statutory Reports Financial Statements Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) 11 Trade receivables (` in million) As at As at 31 March 2018 31 March 2017 Unsecured, considered good 1,850.66 1,376.16 Unsecured, considered doubtful 188.31 115.81 2,038.97 1,491.97 Loss allowance Unsecured, considered doubtful (188.31) (115.81) Net trade receivables 1,850.66 1,376.16 Of the above, trade receivables from related parties are as below: Total trade receivable (refer note 29) 84.65 67.59 Expected credit loss allowance (2.26) (3.29) Net trade receivables from related parties 82.39 64.30 The Company uses a provision matrix to determine expected credit loss on portfolio of its trade receivable. The provision matrix is based on its historically observed default rates over the expected life of the trade receivable and is adjusted for forward-looking estimates. At each reporting period, the historically observed default rates are updated and changes in forward-looking estimates are analysed. The expected credit loss allowance is based on the ageing of the days the receivables are due and the rates as given in the provision matrix. The provision matrix at the end of the reporting period is as follows. Ageing Category More than 1 year Within due date Due date to 1 Year from due date ESI/CGHS/SCHEMES 1.76% 12.02% 52.88% Others 0.63% 8.94% 51.87% Note The Company exposure to credit risks, currency risks and loss allowances are disclosed in note 44. The trade receivables are hypothecated as security as part of as part of working capital facility 12 Cash and bank balances (` in million) As at As at 31 March 2018 31 March 2017 (a) Cash and cash equivalents Cash on hand 29.29 8.91 Balance with banks - - -In current accounts 171.29 198.08 200.58 206.99 (b) Bank balances other than above -In deposit accounts (due to mature within 12 months of the reporting date) * 13.80 74.58 13.80 74.58 * The above deposits are restrictive as it relates to deposits against the guarantees. For the purpose of the statement of cash flows, cash and cash equivalent comprise the following: (` in million) Particulars As at As at 31 March 2018 31 March 2017 Cash on hand 29.29 8.91 Cheques, drafts on hand - - Balance with banks -In current accounts 171.29 198.08 200.58 206.99 Less: Bank overdraft used for cash management purposes 277.79 44.88 Cash and cash equivalents in the statement of cash flows (77.21) 162.11 130 Narayana Hrudayalaya Limited Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) 13 Equity share capital (` in million) As at As at 31 March 2018 31 March 2017 Authorised 309,000,000* (previous year : 300,000,000) equity shares of ` 10 each 3,090.00 3,000.00 71,000,000* (previous year : Nil) Preference shares of ` 10 each 710.00 - Issued, subscribed and paid up 204,360,804 (previous year : 204,360,804) equity shares of ` 10 each, fully paid up 2,043.61 2,043.61 2,043.61 2,043.61 *The amalgamation of NewRise Healthcare Private Limited with the Company was approved by Minister of Corporate Affairs on 4 October 2017 and accordingly as per the scheme of amalgamation the authorised share capital of the company has been increased by 9,000,000 equity shares and 71,000,000 preference shares. (i) Reconciliation of the equity shares outstanding at the beginning and at the end of the year: (` in million, except no of shares) Particulars As at 31 March 2018 As at 31 March 2017 Number of shares Amount Number of shares Amount At the beginning of the year 204,360,804 2,043.61 204,360,804 2,043.61 Issued during the year - - - - At the end of the year 204,360,804 2,043.61 204,360,804 2,043.61 (ii) Rights, preferences and restrictions attached to equity and preference shares : The Company has equity shares having a nominal value of ` 10 each. Accordingly, all equity shares rank equally with regard to dividend and share in the Company’s residual assets. Each holder of equity shares is entitled to one vote per share. The equity shares are entitled to receive dividend as declared from time to time. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by shareholders. The Company has preference shares having a nominal value of ` 10 each. Preference shares are non-convertible, non-cumulative, non- participating and carry preferential right vis-à-vis equity shares of the Company with respect to payment of dividend and repayment in case of winding up or repayment of capital and shall carry voting rights as per the provisions of Section 47(2) of the Companies Act, 2013. (iii) Particulars of shareholders holding more than 5% equity shares: Particulars As at 31 March 2018 As at 31 March 2017 Number of shares % holding Number of shares % holding Dr Devi Prasad Shetty 64,700,571 31.66% 64,700,571 31.66% Shakuntala Shetty 62,083,095 30.38% 62,083,095 30.38% CDC Group PLC 11,765,046 5.76% 11,765,046 5.76% Ashoka Investment Holdings Limited - - 10,971,130 5.37% 138,548,712 67.80% 149,519,842 73.17% iv) The Company has not bought back any shares during the period of five years immediately preceding the last balance sheet date. Further, the Company has not issued any shares for consideration other than cash during the period of five years immediately preceding the last balance sheet date except, the issue of 199,654,247 bonus shares on 25 March 2015 and conversion of Optionally Convertible Debentures along with accrued interest into 4,360,804 equity shares on 1 December 2015. Annual Report 2017-18 131 Company Overview Statutory Reports Financial Statements Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) 14 Other equity (` in million) As at As at 31 March 2018 31 March 2017 Reserves and surplus Securities premium reserve 4,901.24 4,901.24 Capital reserve 1.54 1.54 Treasury Shares At the commencement of the year (20.08) (20.40) Add: Additions during the year 0.54 0.32 At the end of the year (19.54) (20.08) General reserve 250.00 250.00 Share options outstanding account At the commencement of the year 92.34 33.61 Add: Amounts recorded on grants during the year 42.01 58.73 At the end of the year 134.35 92.34 Retained earnings At the commencement of the year 3,317.98 2,366.89 Add: Net profit after tax transferred from statement of profit and loss 584.22 951.09 At the end of the year 3,902.20 3,317.98 Other Comprehensive Income Effective portion of Cash flow hedge reserve At the commencement of the year - - Add: Addition during the year (7.45) - At the end of the year (7.45) - Re-measurement of defined benefit plans At the commencement of the year (1.91) (5.71) Add: Addition during the year 2.84 3.80 At the end of the year 0.93 (1.91) At the end of the year 9,163.27 8,541.11 Capital reserve Capital reserve was created at the time of acquisition of hospital in Barasat. Securities premium reserve Securities premium reserve is used to record the premium received on issue of shares. It is utilised in accordance with the provisions of the Companies Act, 2013 Treasury Shares Own equity instruments that are reacquired (treasury shares) are recognised at cost and deducted from other equity. Share options outstanding account The Company has established share based payment plan for eligible employees of the Company, its subsidiaries or associates. Also refer note 39 for further details on these plans. General reserve General reserve is used from time to time to transfer profits from retained earnings for appropriate purposes. 132 Narayana Hrudayalaya Limited Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) 15 Borrowings (` in million) As at As at 31 March 2018 31 March 2017 (a) Non-current (i) Secured Term loans From banks (refer note I) 4,636.45 1,150.39 Less: Current maturity of long term debt [refer note 16 (b)] (165.70) (193.36) Total non-current borrowings 4,470.75 957.03 (b) Current (i) Secured Loans repayable on demand Bank overdrafts (refer note II) 277.79 44.88 Total current borrowings 277.79 44.88 I Term loans from banks : Sl No. Details of repayment terms, interest and maturity Nature of security (i) Term loan from HSBC Bank : ` 33.00 million (previous year : ` 99.00 million). It is repayable Secured via mortgage of title deeds on the in 2 quarterly instalments from the reporting date ( previous year 5 quarterly instalments). immovable property of Narayana Hospital Interest is charged at 8.10% p.a.(previous year 8.80%) Private Limited. (ii) Term loan from HSBC Bank : ` 37.50 million (previous year: ` 87.50 million ). It is repayable in 3 quarterly instalments from the reporting date (previous year 7quarterly instalments). Interest is charged at 8.10% p.a.(previous year 8.80%) (iii) Term loan from HSBC Bank : ` 19.00 million (previous year : ` 38.00 million). It is repayable in 4 quarterly instalments from the reporting date (previous year 8 quarterly instalments). Interest is charged at 8.10 % p.a (previous year: 9.50% p.a,) (iv) Term loan from HSBC Bank : ` 270.00 million (previous year : ` nil ). It is repayable in 20 Movable Fixed Assets acquired out of the loan. quarterly instalments from December 2019 (previous year : nil) after moratorium period of 18 months from date of 1st disbursement. Date of 1st disbursement is 12 March 2018. Interest is charged at 8.30% p.a. (previous year: nil) (v) Term loan from ICICI Bank: ` 900.00 million (previous year : ` 580.00 million). Repayable in Movable Fixed Assets acquired out of the loan. 96 monthly instalments from 31 January 2019 (previous year : nil) after 3 years Moratorium from date of 1st Disbursement. Date of 1st Disbursement 19th January 2016. Interest is charged at 8.50% p.a., (prevoius year: 9.35% p.a.) (vi) Foreign currency loan taken from EXIM Bank : ` nil ($ nil ) [previous year : ` 1,45.89 million( Exclusively charge on land and building located $ 2.25 million)]. Fully repaid during the year (previous year: 10 quarterly Instalments). over Sy NO:135/1 and 135/2 Kittiganahalli Interest was linked to the Libor (6 month) + 340 base points. (previous year: Libor (6 Attibele Hobli, Anekal Taluk, Bangalore. month) + 340 base points). (vii) Foreign currency loan taken from EXIM Bank : ` 1,626.10 million ($ 25 million) [ previous Exclusive charge on the Land and Building located year: nil ]. It is repayable in 28 quarterly instalments from January 2019 (previous year : at Sy. No. 135/1 and 135/2 with an aggregate nil) after Moratorium period of 12 months from the date of 1st disbursement. Date of 1st extent of Ac 4.35 guntas located at Narayana disbursement is 2nd January 2018 Interest is linked to the Libor (6 month) + 175 base Health City, Bommasandra, Bangalore, Exclusive points. (previous year:nil). charge on the Land and Building located at Sy. No. 1/1, 1/2, 2/2, and 2/3 with an aggregate extent of Ac 3.24 guntas located at Narayana Health City, Bommasandra, Bangalore, Appropriate charge on the other tangible specific movable fixed assets. (viii) Term loan from SBI: ` 580.00 million (previous year: ` 200.00 million). Repayable in 96 Movable Fixed Assets acquired out of the loan. monthly instalments from March 2019 (previous year : nil) after 2 years Moratorium from Exclusive charge on land & building located date of 1st Disbursement. Date of 1st Disbursement 31st March 2017. Interest is charged in plot #3201, phase III, DLF City, Gurgaon, at 8.15% p.a.(previous year: 8.35% p.a.) Haryana (ix) Term loan from SBI: ` 1,170.85 million (previous year: ` nil). Repayable in 31 quarterly instalments from December 2019 (previous year : nil) after 2 years Moratorium from date October 2017. Interest is charged at 8.15% p.a.(previous year: nil). Annual Report 2017-18 133 Company Overview Statutory Reports Financial Statements Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) III Overdraft and Cash Credit facilities (i) Overdraft facilities from HSBC bank ` 277.79 million (previous year: ` nil) carry interest ranging between 7.90% - 9.25% (previous year: nil) computed on a monthly basis on the actual amount utilised and are repayable on demand. These are secured by pari passu charge by way of hypothecation of stock, book debts and specific charge on fixed assets of the Company. (ii) Overdraft facilities from YES bank ` nil (previous year: ` 44.88 million) carry interest nil (previous year: carry interest ranging between 8.40% - 10.25%) computed on a monthly basis on the actual amount utilised and are repayable on demand. These are secured by pari passu charge by way of hypothecation of stock, book debts and specific charge on fixed assets of the Company. 16 Other financial liabilities (` in million) As at As at 31 March 2018 31 March 2017 (a) Non-current Payable towards share purchased for ESOP Trust 20.40 20.40 Liability towards assets replacement cost 67.98 38.79 Liability for financial guarantee 22.99 - Creditors for capital goods 45.52 - Derivatives designated and effective as hedging instruments carried at fair value Interest rate swap 11.39 - 168.28 59.19 (b) Current To parties other than related parties Current maturities of long-term borrowings with banks (refer note 15(a))* 165.70 193.36 Interest accrued but not due on borrowings 0.38 0.74 Creditors for capital goods 134.80 368.39 Other financial liabilities 18.53 - Liability for financial guarantee 6.59 - To related parties (refer note 29) - - Creditors for capital goods 58.03 58.03 384.03 620.52 *The Company’s exposure to liquidity risk are disclosed in note 44 17 Provisions (Refer Note 32) (` in million) As at As at 31 March 2018 31 March 2017 (a) Non-current Provision for employee benefits Gratuity 135.66 143.42 135.66 143.42 (b) Current Provision for employee benefits Gratuity 60.28 12.36 Compensated absences 142.60 96.60 202.88 108.96 134 Narayana Hrudayalaya Limited Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) 18 Other liabilities (` in million) As at As at 31 March 2018 31 March 2017 (a) Non-current Unearned revenue 17.63 18.75 Deferred government grant* 137.41 149.40 Deferred government liability for EPCG Licence ** 6.10 - Rent equalisation reserve 53.51 35.57 Others 2.51 1.05 217.16 204.77 (b) Current To parties other than related parties Advance from patients 110.02 96.67 Unearned revenue 1.24 1.26 Deferred government grant* 14.27 16.26 Balances due to statutory/ government authorities 118.06 88.01 Others 6.76 2.18 To related parties (refer note 29) Other payables 10.43 - 260.78 204.38 Summary of the government grant received by the Company and its annual amortisation:- Nature Original grant Annual amortisation amount Monetary grant received for purchasing Property, plant and equipment 220.00 13.97 Non- Monetary grant received for importing Property, plant and equipment 6.10 - *During the financial year 2013-14, the Company had received capital grant from the Assam Government amounting to ` 220.00 million for purchase of fixed assets for operating the hospital in Assam. The Company has recognized this grant as deferred income at fair value which is being amortised over the useful life of the fixed assets in proportion in which the related depreciation is recognized. **During the financial year 2017-18, the Company had received capital grant in the form of EPCG licence from Government of India amounting to ` 6.10 million for import of capital goods subject to fulfilment of export obligation in next 6 years. The Company has recognized this grant as deferred government liability for EPCG licence at fair value. The company will recognize deferred grant income in the statement of profit and loss as per Ind AS. 19 Trade payables (` in million) As at As at 31 March 2018 31 March 2017 Total outstanding dues of micro enterprises and small enterprises (refer note 33) 18.16 11.49 Total outstanding dues of creditors other than micro and small enterprises* 2,218.78 1,691.64 2,236.93 1,703.14 *Payables to related parties (refer note 29 (c) ) 46.16 61.59 The Company’s exposure to currency and liquidity risks related to trade payable is disclosed in note 44. Annual Report 2017-18 135 Company Overview Statutory Reports Financial Statements Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) 20 Revenue from operations (` in million) For the year ended For the year ended 31 March 2018 31 March 2017 Income from medical and healthcare services 17,639.54 15,687.85 Sale of medical consumables and drugs 696.18 625.26 Other operating revenue: Teleradiology income 17.08 16.82 Income from patient amenities 67.34 59.34 Revenue share income 34.09 30.04 Other healthcare services 21.52 39.84 18,475.75 16,459.15 21 Other income (` in million) For the year ended For the year ended 31 March 2018 31 March 2017 Donations received - 0.06 Foreign exchange gain, net - 8.26 Interest income on - Bank deposits 3.64 6.26 - Unsecured loan 5.64 2.19 - Others 13.67 34.44 Interest income from financial asset at amortised cost 28.49 25.16 Government grant 13.97 16.26 Guarantee commission 12.36 14.95 Profit on sale of investment 3.10 5.11 Miscellaneous income 105.51 68.77 186.38 181.46 22 Changes in inventories of medical consumables, drugs and surgical equipments-(Increase)/ Decrease (` in million) For the year ended For the year ended 31 March 2018 31 March 2017 Inventory at the beginning of the year 434.38 439.11 Inventory at the end of the year 504.80 434.38 (70.42) 4.73 23 Employee benefits expense (` in million) For the year ended For the year ended 31 March 2018 31 March 2017 Salaries, wages and bonus 3,277.17 2,918.20 Contribution to provident and other funds (refer note 32) 270.78 241.19 Share based payment to employees (refer note 39) 42.01 58.73 Staff welfare expenses 98.64 80.18 3,688.60 3,298.30 During the financial year 2017-18, project salary cost amounting to ` 51.35 million (previous year: ` 15.79 million) has been capitalised through capital work-in progress. 136 Narayana Hrudayalaya Limited Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) 24 Other expenses (` in million) For the year ended For the year ended 31 March 2018 31 March 2017 Hospital operating expenses Power and fuel 493.90 406.86 Hospital general expenses 199.85 187.75 House keeping expenses 509.32 432.09 Patient welfare expenses 269.91 251.27 Rent 538.86 455.64 Medical gas charges 69.10 56.39 Biomedical wastage expenses 10.78 9.96 Repairs and maintenance - - - Hospital equipments 447.80 380.53 - Buildings 51.75 46.09 - Others 286.57 230.58 Total (A) 2,877.84 2,457.16 Administrative expenses Travel and conveyance 158.31 137.76 Security charges 165.84 148.49 Printing and stationery 106.71 93.86 Rent 89.51 81.15 Advertisement and publicity 303.79 265.74 Legal and professional fees (refer note (i) below) 163.63 171.17 Business promotion 284.40 168.81 Telephone and communication 58.09 45.51 Bank charges 65.75 52.09 Insurance 50.15 37.83 Corporate social responsibility (refer note (ii) below) 22.82 13.60 Rates and taxes 44.83 30.48 Books and periodicals 19.60 12.58 Provision for loss allowance 72.50 (59.24) Bad debts 4.30 121.90 Donations paid 6.23 - Loss on sale of fixed assets 14.55 13.60 Foreign exchange loss, (net) 15.39 - Provision for other than temporary diminution in non current investments - 3.43 Provision for prepaid rent - 19.48 Assets / Capital-work-in-progress written off - 26.78 Miscellaneous expenses 25.10 50.40 Total (B) 1,671.50 1,435.42 Total (A+B) 4,549.34 3,892.58 (i) Payment to auditors* (` in million) For the year ended For the year ended 31 March 2018 31 March 2017 As an auditor Audit fee 4.50 6.35 Limited review 1.40 2.00 In other capacity: Other services (certification fees) - 0.25 Reimbursement of expenses - 0.69 5.90 9.29 *excluding taxes Annual Report 2017-18 137 Company Overview Statutory Reports Financial Statements Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) (ii) Corporate social responsibility Consequent to the requirements of Section 135 of the Companies Act 2013, the Company has made contributions as stated below. The same is in line with activities specified in Schedule VII of the Companies Act, 2013. a) Gross amount required to be spent by the Company during the year is ` 19.36 million (previous year: ` 13.22 million) b) Amount spent during the year ended 31 March 2018 on corporate social responsibility activities: (` in million) Particulars For the year ended For the year ended 31 March 2018 31 March 2017 Construction/acquisition of any asset - - On purposes other than above 22.82 13.60 25 Finance costs (` in million) For the year ended For the year ended 31 March 2018 31 March 2017 Interest expense on financial liabilities measured at amortised cost - term loans from banks 154.87 90.16 - bank overdraft 9.79 3.23 - commercial papers 4.37 0.50 - others 1.41 - Other borrowing costs 0.30 0.82 Net loss on foreign currency transactions and translation to the extent 20.13 7.62 regarded as borrowing costs Finance cost on finance lease obligations 5.88 15.75 196.75 118.08 During the year the company has capitalised interest cost amounting to ` 59.47 million (previous year Nil). 26 Depreciation and amortisation expense (` in million) For the year ended For the year ended 31 March 2018 31 March 2017 Depreciation of property, plant and equipment (refer note 4) 762.26 658.94 Amortisation of intangible assets (refer note 4) 18.23 23.12 780.49 682.06 27. Contingent liabilities and commitments (i) Contingent liabilities (` in million) Particulars As at As at 31 March 2018 31 March 2017 Claims against the Company not acknowledged as debts in respect of:- a) Sales tax (refer note A below) 31.83 - b) Income tax (refer note B below) 12.17 12.17 Guarantees: (a) Bank guarantee 25.00 490.65 (b) The Company has issued corporate guarantee to its subsidiaries amounting to ` 3,554.63 million (previous year ` 1,152.64 million) and total loan outstanding as on 31 March 2018 is ` 3,101.40 million ( previous year : ` 1,122.10 million) 138 Narayana Hrudayalaya Limited Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) Note: A. Sales Tax a) For financial year 2011-12, the Company has received a notice proposing levy of value added tax on sale of food to patients and sale of implants, medicines and consumables under Karnataka Value Added Tax Act, 2003. Based on the Company’s submission, the department has issued an order with a demand of ` 10.31 million by levying tax on sale of food to patients . Against this demand, the Company has deposited ` 3.1 million with the department and filed an application for stay with Joint Commissioner of Commercial Taxes( Appeal). b) For financial year 2012-13, the Company has received a notice proposing levy of value added tax on sale of food to patients and sale of implants, medicines and consumables under Karnataka Value Added Tax Act, 2003. Based on the Company’s submission, the department has issued an order with a demand of ` 21.52 million by levying tax on sale of food to patients. Subsequent to year end, against this demand the Company has deposited ` 6.45 million and filed an application for stay with Joint Commissioner of Commercial Taxes( Appeal). B. Income Tax For assessment year 2009-2010 the Company had received an assessment order under section 143(3) of the Income Tax Act, 1961 on 28 December 2011 with a demand of ` 12.17 million. Against this demand, the Company had paid ` 10.00 million under protest and filed an appeal with the Commissioner of Income Tax (Appeals) (CIT(A)). CIT(A) had issued an order in favour of the Company. The department then filed an appeal with the Income Tax Appellate Tribunal (ITAT) against the order of CIT(A). On 23 January 2015, ITAT had issued an order in favour of the Company. Subsequently, the department has filed an appeal with High Court of Karnataka challenging the order of ITAT. C. The Company believes that other disputes, lawsuits and claims, including commercial matters, which arise from time to time in the ordinary course of business will not have any material adverse effect on its financial statements in any given accounting year. D. The Company has given letter of support to its subsidiary companies, namely Narayana Hrudayalaya Surgical Hospital Private Limited, Narayana Hospitals Private Limited, Meridian Medical Research & Hospital Limited, Narayana Health Institutions Private Limited, Narayana Institute for Advanced Research Private Limited, and Narayana Vaishno Devi Specialty Hospitals Private Limited. Under the letter of support, the Company is committed to provide operational and financial assistance as is necessary for the subsidiary companies to enable them to operate as going concern for a period of at least one year from the balance sheet date (31 March 2018). (ii) Commitments Estimated amounts of contracts remaining to be executed on capital account (net of advances) and other commitments and not provided for amounts to ` 63.60 million (previous year: ` 182.12 million). 28. Management agreement The Company has management agreement for the management, operation and utilization of their hospital facilities. As a consideration towards the aforesaid arrangement, the Company is obligated to offer discounts to patients nominated by the trust at free of cost / concession as per the terms of the agreement. The discounts thus offered have been recognised as revenue Annual Report 2017-18 139 Company Overview Statutory Reports Financial Statements Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) amounting to ` 12.11 million (previous year: ` 12.11 million) with a corresponding charge to rent expense. 29. Related party disclosures (a) Details of related parties Nature of relationship Name of related parties Narayana Institute for Advanced Research Private Limited (NIARPL) Narayana Hrudayalaya Surgical Hospital Private Limited (NHSHPL) Narayana Hospitals Private Limited (NHPL) Narayana Health Institutions Private Limited (NHIPL) Narayana Cayman Holdings Ltd (NCHL) Narayana Hrudayalaya Hospitals Malaysia SDN. BHD (NHHM) Subsidiaries Asia Healthcare Development Limited ( AHDL) ( till November 2016) Mendian Medical Research & Hospital Limited (MMRHC) Narayana Vaishno Devi Specialty Hospitals Private Limited (NVDSHPL) Narayana Holdings Private Limited (with effect from 11 April 2016 ) Health City Cayman Islands Ltd (HCCI) (Subsidiary of NCHL) (with effect from 02 January 2018) Dr. Devi Prasad Shetty- Chairman Key Management Personnel Dr. Ashutosh Raghuvanshi - Managing Director (KMP) Viren Shetty - Whole-time Director Kesavan Venugopalan - Chief Financial Officer Dr. Varun Shetty Relatives of KMP Dr. Anesh Shetty Shakuntala Shetty Health City Cayman Islands Ltd (HCCI) (upto 1st January 2018) Associate of subsidiaries Cura Technologies INC.(with effect from 15 November 2016) ISO Healthcare (with effect from 5 July 2016) Associate TriMedx India Private Limited (TriMedx) Narayana Health Academy Private Limited (NHAPL) Kateel Software Private Limited Hrudayalaya Pharmacy Thombosis Research Institutes Enterprises under control or Charmakki Infrastructures joint control of KMP and their relatives Narayana Hrudayalaya Foundation (NHF) Mazumdar Shaw Medical Foundation (MSMF) Narayana Hrudayalaya Charitable Trust (NHCT) (uptill 20 March 2017) Daya Drishti Charitable Trust Asia Heart Foundation (AHF) Enterprises where control of Narayana Hrudayalaya Private Limited Employees Group Gratuity Trust Company exists 140 Narayana Hrudayalaya Limited Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) - - (-) (-) 0.22 7.00 Total 24.02 17.02 66.13 20.00 46.13 (7.91) (6.38) 145.71 145.49 170.28 (21.91) (15.53) (138.93) (138.93) (150.28) (150.28) (112.94) 1,755.43 ( ` in million) ------(-) (-) (-) (-) (-) (-) (-) (-) (-) 7.00 7.00 (7.91) (6.38) (6.38) relatives Enterprises KMP and their joint control of under control or ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) 86.44 86.44 (138.93) (138.93) Associate Subsidiary/ Associate of ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) KMP Relatives of ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) Key Key (KMP) Personnel Personnel Management - - - (-) (-) (-) (-) (-) (-) 0.22 59.27 59.05 17.02 17.02 66.13 20.00 46.13 170.28 (15.53) (15.53) (150.28) (150.28) (112.94) 1,755.43 Subsidiaries Transactions with related party during the year ended 31 March 2018 Transactions Figures in brackets are for the previous year. TOTAL MMRHL Sale / transfer of medical consumables and drugs Services HCCI TOTAL Advance on account of discount entitlement AHF Charmakki Infrastructures Interest income on security deposit NHPL Repayment of unsecured loan NHSHPL TOTAL NHSHPL Unsecured loan given NCHL Payment of share application money Payment NCHL Transactions Related party disclosures(continued) (b) 29. Annual Report 2017-18 141 Company Overview Statutory Reports Financial Statements Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) - - - (-) 0.42 0.16 0.06 8.92 2.98 4.26 Total 22.69 10.15 12.11 75.72 25.00 10.06 12.72 27.94 (0.25) (0.25) (0.61) (2.42) (0.48) (1.53) (1.73) (4.88) (22.18) (14.91) (12.11) (75.87) (25.00) (10.06) (12.42) (28.39) ( ` in million) ------(-) (-) (-) (-) (-) (-) (-) (-) 0.22 0.16 0.06 4.26 12.11 47.78 25.00 10.06 12.72 (0.73) (0.25) (0.48) (4.88) (12.11) (47.48) (25.00) (10.06) (12.42) relatives Enterprises KMP and their joint control of under control or ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) 7.71 7.71 (14.91) (14.91) Associate Subsidiary/ Associate of ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) KMP Relatives of ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) Key Key (KMP) Personnel Personnel Management ------(-) (-) (-) (-) (-) (-) (-) (-) (-) 0.42 2.44 8.92 2.98 14.76 27.94 27.94 (6.54) (0.25) (0.61) (2.42) (1.53) (1.73) (28.39) (28.39) Subsidiaries Transactions with related party during the year ended 31 March 2018 Transactions TOTAL Figures in brackets are for the previous year. Others NHF Daya Drishti Charitable Trust NHSHPL AHDL AHF HCCI NVDSHPL Reimbursement of expenses NHPL Discount entitlement (excluding tax) AHF TOTAL MSMF AHF Charmakki Infrastructures Rent expenses NHPL Lab outsourcing expense MSMF Transactions Related party disclosures(continued) (b) 29. 142 Narayana Hrudayalaya Limited Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) - - (-) (-) (-) (-) 8.58 4.09 0.24 2.12 0.01 1.72 4.50 0.92 0.01 0.01 Total 45.35 (1.98) (1.91) (4.41) (1.98) (6.41) (0.10) (6.31) (70.19) 256.02 (50.41) (20.00) (243.26) (102.66) 2,062.13 1,752.18 ( ` in million) ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) 0.01 0.01 (6.41) (0.10) (6.31) relatives Enterprises KMP and their joint control of under control or ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) 8.58 8.58 0.69 (1.98) Associate Subsidiary/ Associate of ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) KMP Relatives of ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) Key Key (KMP) Personnel Personnel Management - - - - - (-) (-) (-) (-) (-) (-) (-) 4.09 0.24 2.12 0.01 1.72 4.50 0.23 45.35 (1.98) (0.07) (1.91) (4.41) 256.02 (50.41) (20.00) (70.19) (243.26) (102.66) 2,053.55 1,752.18 Subsidiaries Transactions with related party during the year ended 31 March 2018 Transactions Figures in brackets are for the previous year. TOTAL Narayana Holdings Pvt Ltd. NCHL NHSHPL TriMedx -associate TriMedx Investment in equity instruments MMRHL TOTAL NHSHPL NHPL MMRHL Interest income net of tax NCHL Rental income net of tax NHSHPL Advance given for payment to employees HCCI TOTAL NHF Revenue from healthcare services NHCT Transactions Related party disclosures(continued) (b) 29. Annual Report 2017-18 143 Company Overview Statutory Reports Financial Statements Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) - (-) (-) (-) (-) (-) (-) (-) 0.21 7.77 0.89 1.35 0.12 1.97 4.99 Total 12.36 10.12 33.10 26.14 (6.56) (0.95) (9.81) 244.91 (14.95) (14.95) (389.93) ( ` in million) ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) 0.21 (0.95) relatives Enterprises KMP and their joint control of under control or ------(-) (-) (-) (-) (-) (-) (-) (-) 5.82 8.84 8.84 (6.56) (9.81) 244.91 (14.95) (14.95) (389.93) Associate Subsidiary/ Associate of ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) KMP Relatives of ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) Key Key (KMP) Personnel Personnel Management - - - (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) 1.95 3.52 0.89 1.35 1.28 0.12 1.97 4.99 33.10 26.14 Subsidiaries Transactions with related party during the year ended 31 March 2018 Transactions Figures in brackets are for the previous year. Patents transferred Patents INC.-associate of NCHL Cura Technologies Maintenance of medical equipment -associate TriMedx Purchases of medical stores Hrudayalaya Pharmacy Software license fees HCCI TOTAL NHSHPL MMRHL Guarantee commission HCCI Sale of fixed assets MMRHL TOTAL NHSHPL MMRHL Fair value of guarantee in subsidiaries Fair HCCI Transactions Related party disclosures(continued) (b) 29. 144 Narayana Hrudayalaya Limited Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) - - - - (-) (-) (-) (-) (-) 6.12 2.54 4.80 1.97 (-) (-) Total 27.13 18.12 38.95 10.55 52.52 26.61 (4.00) (2.04) (3.00) (9.48) 127.48 327.36 (37.99) (15.22) (32.63) (43.74) (54.85) (25.00) (39.99) 33.10 (106.11) (119.84) 4.52 2,441.29 2,113.93 ( ` in million) ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) 6.12 - - relatives Enterprises KMP and their joint control of - - - - under control or ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) - - - - Associate Subsidiary/ Associate of ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) - - - - 7.34 2.54 4.80 KMP (5.04) (2.04) (3.00) - - Relatives of ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) - - - - Key Key 27.13 18.12 38.95 10.55 52.52 (4.00) (9.48) (KMP) 120.14 - - (37.99) (15.22) (32.63) (43.74) (101.07) Personnel Personnel Management ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) 1.97 (-) (-) 26.61 327.36 (54.85) (25.00) (39.99) (119.84) 4.52 2,441.29 2,113.93 33.10 Subsidiaries Transactions with related party during the year ended 31 March 2018 Transactions Figures in brackets are for the previous year. Share based payments Ashutosh Raghuvanshi Dr. Long-term employee benefits* Venugopalan Kesavan TOTAL Kesavan Venugopalan Kesavan Dr. Ashutosh Raghuvanshi Dr. Dr. Anesh Shetty Dr. Dr. Varun Shetty Varun Dr. Viren Shetty Short-term employee benefits* Devi Prasad Shetty Dr. TOTAL Donation given Thrombosis Research Institute MMRHL HCCI Fair value of guarantee given to subsidiaries Fair NHSHPL TOTAL MMRHL NVDSHPL HCCI Guarantees given NHSHPL Transactions Compensation to KMP is bifurcated into short-term employee benefits, long-term benefits and share based payments. The remuneration to KMP does Compensation to KMP is bifurcated into short-term not include the provisions made for gratuity and compensated absences, as they are obtained on an actuarial basis Company a whole. *The amounts are determined as per section 17(2) of the Income tax Act, 1961 read with related Rules. Related party disclosures(continued) (b) Note: 29. Annual Report 2017-18 145 Company Overview Statutory Reports Financial Statements Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) - - - - 5.56 9.52 0.91 1.05 0.83 Total Total 58.03 20.00 42.21 29.90 (3.28) (1.12) (0.92) (0.84) (0.52) (0.62) (58.03) (20.00) (21.49) (58.03) (15.71) (35.02) (150.28) ( ` in million) ------(-) (-) (-) (-) (-) (-) (-) (-) (-) 0.91 5.56 0.91 (2.04) (1.12) (0.92) (21.49) relatives Enterprises KMP and their joint control of under control or ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (15.71) (15.71) Associate Subsidiary/ Associate of ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) KMP Relatives of ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) Key Key (KMP) Personnel Personnel Management ------(-) (-) (-) (-) 9.52 1.05 0.83 58.03 20.00 41.30 29.90 (3.28) (0.84) (0.52) (0.62) (58.03) (20.00) (40.28) (35.02) (150.28) Subsidiaries The balances receivable from and payable to related parties from and payable to related The balances receivable Figures in brackets are for the previous year. Other financial liabilities - (Current) Creditors for capital goods NIARPL Financial assets- loans (Current)- Unsecured Loan NHSHPL Financial assets- loans (Non current)- Unsecured Loan NHPL TOTAL Other Current assets- Due for reimbursement of expense AHF NHSHPL NHF Hrudayalaya Pharmacy HCCI NIARPL NVDSHPL NCHL Other financial assets (Current)- Due for reimbursement of expense NHIPL Balances Related party disclosures(continued) c) 29. 146 Narayana Hrudayalaya Limited Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) 6.45 6.97 Total Total 25.77 79.88 25.91 18.94 92.30 35.74 56.56 15.78 32.52 (6.97) 274.18 194.30 218.33 (42.07) (19.10) (72.88) (25.91) (18.94) (42.70) (75.51) (15.72) (29.27) (250.17) (177.29) (118.21) (234.18) ( ` in million) ------(-) (-) (-) (-) (-) (-) 6.97 6.97 79.88 79.88 35.74 35.74 15.78 (6.97) (6.97) 218.33 (72.88) (72.88) (42.70) (42.70) (15.72) (234.18) relatives Enterprises KMP and their joint control of under control or ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) 6.45 (42.07) Associate Subsidiary/ Associate of ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) KMP Relatives of ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) Key Key (KMP) Personnel Personnel Management ------(-) (-) (-) (-) (-) (-) 25.77 18.94 18.94 56.56 56.56 32.52 194.30 194.30 (19.10) (18.94) (18.94) (75.51) (75.51) (29.27) (177.29) (177.29) Subsidiaries The balances receivable from and payable to related parties from and payable to related The balances receivable Figures in brackets are for the previous year. TriMedx -associate TriMedx Trade payables Trade NHPL TOTAL Charmakki Infrastructures TOTAL Financial assets- loans (non current)- Security deposit NHPL Charmakki Infrastructures Other current assets - Prepaid rent NHPL TOTAL Charmakki Infrastructures Other non-current assets - Prepaid rent NHPL Other current assets - Prepaid expense AHF Other non-current assets - Prepaid expense AHF Other financial assets(current) - Share application money application - Share financial assets(current) Other pending allotment NCHL Balances Related party disclosures(continued) c) 29. Annual Report 2017-18 147 Company Overview Statutory Reports Financial Statements Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) - - (-) (-) 5.75 5.75 6.85 0.38 0.44 84.65 Total Total 86.83 10.43 46.16 77.42 13.50 (3.85) (3.78) (0.07) (0.32) (0.42) 760.00 680.70 (59.70) (67.59) (67.27) (61.59) (432.64) (720.00) ( ` in million) ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) 0.38 0.38 0.44 10.43 13.94 13.50 (0.32) (0.32) (0.42) (0.42) relatives Enterprises KMP and their joint control of under control or ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) 6.85 6.85 6.45 (67.27) (67.27) (42.07) Associate Subsidiary/ Associate of ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) KMP Relatives of ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) Key Key 86.83 (KMP) (59.70) Personnel Personnel Management ------(-) (-) (-) (-) (-) (-) (-) (-) 5.75 5.75 77.42 25.77 77.42 (3.85) (3.78) (0.07) 760.00 680.70 (19.10) (432.64) (720.00) Subsidiaries The balances receivable from and payable to related parties from and payable to related The balances receivable Figures in brackets are for the previous year. NHSHPL Guarantees outstanding MMRHL Share based payments Ashutosh Raghuvanshi Dr. TOTAL NHPL Other financial assets (current) - Interest accrued on unsecured loan NHSHPL TOTAL Other liabilities (current) - payables AHF TriMedx -associate TriMedx NHF TOTAL Trade receivables Trade HCCI MSMF Charmakki Infrastructures Balances Related party disclosures(continued) c) 29. 148 Narayana Hrudayalaya Limited Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) Total Total 25.00 322.97 343.69 (25.00) (322.97) (348.94) (465.65) 3,579.63 2,113.93 (1,643.29) ( ` in million) - - - - - (-) (-) (-) (-) (-) relatives Enterprises KMP and their joint control of under control or - - - - - (-) (-) (-) (465.65) (465.65) Associate Subsidiary/ Associate of - - - - - (-) (-) (-) (-) (-) KMP Relatives of - - - - - (-) (-) (-) (-) (-) Key Key (KMP) Personnel Personnel Management (-) 25.00 322.97 343.69 (25.00) (322.97) (348.94) 3,579.63 2,113.93 (1,177.64) Subsidiaries No amount in respect of related parties have been written off/back or provided for during the year. Related party relationships have been identified by the Management and relied upon auditors. A number of key management personnel, or their related parties, hold positions in other entities that result them having control or significant influence over those entities. A number of these entities transacted with the Company during the reporting period. The terms and conditions of transactions with key management personnel and their related parties were no more favourable than those available, or which might reasonably be expected to in respect of similar transactions with non-key management personnel related entities on an arm’s length basis. The balances receivable from and payable to related parties from and payable to related The balances receivable Security outstanding NHSHPL Guarantees received NHPL TOTAL NVDSHPL HCCI Balances Figures in brackets are for the previous year. (a) (b) (c ) (d) Related party disclosures(continued) c) Note: 29. Annual Report 2017-18 149 Company Overview Statutory Reports Financial Statements Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) 30. Segment information Operating segments Ind AS 108 “Operating Segment” (“Ind AS 108”) establishes standards for the way that public business enterprises report information about operating segments and related disclosures about products and services, geographic areas, and major customers. Based on the “management approach” as defined in Ind AS 108, Operating segments are to be reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker (CODM).The CODM evaluates the Company’s performance and allocates resources on overall basis. The Company’s sole operating segment is therefore ‘Medical and Healthcare Services’. Accordingly, there are no additional disclosures to be provided under Ind AS 108, other than those already provided in the financial statements. Entity wide disclosures - information about Geographical areas Geographical information analyses the company’s revenue and non current assets by the Company’s country of domicile (i.e. India) and other countries. In presenting the geographical information, segment revenue has been based on the geographical location of the customers and segment assets which have been based on the geographical location of the assets. (i) Revenue from operations (` in million) Particulars For the year ended For the year ended 31 March 2018 31 March 2017 India 18,330.26 16,320.22 Rest of the world (Cayman Islands) 145.49 138.93 18,475.75 16,459.15 (ii) Non current assets * (` in million) Particulars As at As at 31 March 2018 31 March 2017 India 10,795.08 8,053.34 10,795.08 8,053.34 *Non-current assets exclude financial instruments. 31. Investments, loans, guarantees and security (a) The Company has paid the following amounts towards share application money for allotment of equity shares: (` in million) Entity As at Payment / (refund) Allotment As at 31 March 2017 during the year during the year 31 March 2018 Narayana Cayman Holdings Ltd 29.27 1,755.43 1,752.18 32.52 29.27 1,755.43 1,752.18 32.52 (b) The Company has made investment in the following Companies: (` in million) Entity As at Allotment / Sold Impairment / As at 31 March 2017 Purchases during the year write off 31 March 2018 during the year Investment in equity instruments Narayana Institute for Advanced 57.60 - - - 57.60 Research Private Limited Narayana Hrudayalaya Surgical Hospital 465.06 256.02 - - 721.08 Private Limited 150 Narayana Hrudayalaya Limited Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) (` in million) Entity As at Allotment / Sold Impairment / As at 31 March 2017 Purchases during the year write off 31 March 2018 during the year Narayana Hospitals Private Limited 532.61 - - - 532.61 Narayana Cayman Holdings Limited 1,340.03 1,752.18 - - 3,092.21 Narayana Hrudayalaya Hospitals 14.10 - (14.10) - Malaysia SDN. BHD. Narayana Holdings Private Limited 50.41 - - - 50.41 Meridian Medical Research & Hospital 1,067.15 45.35 - - 1,112.50 Limited Narayana Vaishno Devi Specialty 10.00 - - 10.00 Hospitals Private Limited TriMedx India Private Limited 3.00 8.58 - (11.58) - Others Fair Value of guarantee in subsidiaries* - 33.10 - - 33.10 3,539.96 2,095.23 (14.10) (11.58) 5,609.51 *Pertains to guarantees provided by company to its subsidiaries and same has been eliminated during consolidation. The transaction has been recorded in accordance with the applicable accounting standard and has no implication under any statute. (c) The Company has given unsecured loans to the following entities: (` in million) Entity As at Movement As at Purpose of loans 31 March 2017 31 March 2018 Subsidiaries Narayana Hospitals Private Limited 20.00 - 20.00 Financial assistance Narayana Hrudayalaya Surgical Hospital 150.28 150.28 - Financial assistance Private Limited Narayana Cayman Holdings Ltd - 46.13 - Financial assistance Others Mytec Process (P) Ltd. - 17.00 17.00 Financial assistance 170.28 213.41 37.00 (d) The Company has provided guarantees to the following entities: (` in million) Entity As at Movement As at Purpose of guarantees 31 March 2017 31 March 2018 Health City Cayman Islands Ltd 465.65 (465.65) - Bank guarantee through Canara Bank given to Bank of America to give term loan to Health City Cayman Islands Limited Health City Cayman Islands Ltd - 2,113.93 2,113.93 Corporate guarantee given to First Caribbean International Bank to give term loan to Health City Cayman Islands Limited. Narayana Hrudayalaya Surgical Hospital 432.64 327.36 760.00 Corporate guarantee given to Yes Private Limited Bank and GE Capital Services for giving term loan/working capital loan/equipment loan to Narayana Hrudayalaya Surgical Hospital Private Limited Annual Report 2017-18 151 Company Overview Statutory Reports Financial Statements Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) (` in million) Entity As at Movement As at Purpose of guarantees 31 March 2017 31 March 2018 Narayana Vaishno Devi Specialty 25.00 - 25.00 Bank guarantee given by Yes Bank to Hospitals Private Limited Sri Mata Vaishno Devi Shrine Board on behalf of Narayana Vaishno Devi Specialty Hospitals Private Limited. Meridian Medical Research & Hospital 720.00 (39.30) 680.70 Corporate guarantee given to State Limited Bank of India for giving term loan/ working capital loan to Meridian Medical Research & Hospital Limited 1,643.29 1,936.34 3,579.63 (e) The Company has provided the security to the following entity: (` in million) Entity As at Movement As at Purpose of security 31 March 2017 31 March 2018 Narayana Hrudayalaya Surgical Hospital 322.97 - 322.97 Property, plant and equipment has Private Limited been given to Yes Bank as security for giving term loan to Narayana Hrudayalaya Surgical Hospital Private Limited. 322.97 - 322.97 32. Employee benefits Defined contribution plan The Company makes contributions towards provident fund and employee state insurance to a defined contribution retirement benefit plan for qualifying employees. Under the plan, the Company is required to contribute a specified percentage of payroll cost to the retirement benefit plan to fund the benefits. The amount recognised as an expense towards contribution to Provident Fund and Employee State Insurance for the year aggregated to ` 214.69 million (previous year: ` 195.50 million ) Defined benefit plan The Company operates post-employment defined benefit plan that provide gratuity. The gratuity plan entitles an employee, who has rendered at least five years of continuous service, to receive one-half month’s salary for each year of completed service at the time of retirement/exit. The gratuity fund is administered by a trust formed for this purpose and is managed by Kotak Life Insurance. The Company’s obligation in respect of the gratuity plan, which is a defined benefit plan, is provided for based on actuarial valuation carried out by an independent actuary using the projected unit credit method. The Company recognizes actuarial gains and losses immediately in the statement of profit and loss. The Company accrues gratuity as per the provisions of the Payment of Gratuity Act, 1972 as applicable as at the balance sheet date. A. Based on the actuarial valuation obtained in this respect, the following table sets out the status of the gratuity plan and the amounts recognised in the Company’s Standalone financial statements as at balance sheet date: (` in million) Particulars As at As at 31 March 2018 31 March 2017 Defined benefit obligations liability 210.59 169.08 Plan assets (20.51) (19.56) Net defined benefit liability 190.08 149.52 Full & final settlement cases 5.86 6.27 Liability for compensated absences 142.60 96.60 Total employee benefit liability 338.54 252.39 Non-current 135.66 143.42 Current 202.88 108.96 152 Narayana Hrudayalaya Limited Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) B. Reconciliation of net defined benefit (assets) / liability The following table shows a reconciliation from the opening balances to the closing balances for net defined benefit (asset) liability and its components. i) Reconciliation of present values of defined benefit obligation (` in million) Particulars As at As at 31 March 2018 31 March 2017 Defined benefit obligation as at 1 April 169.08 137.49 Benefits paid (11.12) (10.98) Current service cost 41.70 36.31 Past service cost 3.42 - Interest cost 12.44 9.90 Actuarial (gains) / losses recognised in other comprehensive income -changes in demographic assumptions 7.72 4.78 -changes in financial assumptions 3.10 13.64 -experience adjustments (15.75) (22.06) - due to other reason - Defined benefit obligations as at 31 March* 210.59 169.08 * The above amount does not include ` 5.86 million (previous year: ` 6.27 million) pertaining to employees who left the organisation but full and final settlement was not done till 31 March 2018. The same was computed on actual basis. ii) Reconciliation of fair values of plan assets (` in million) Particulars As at As at 31 March 2018 31 March 2017 Plan assets at beginning of the year 19.56 6.79 Contributions paid into the plan 11.18 21.11 Interest income 1.47 0.52 Benefits paid (11.12) (10.98) Return on plan assets (0.58) 2.12 Plan assets at the end of the year 20.51 19.56 Net defined benefit liability 190.08 149.52 C. i) Expense recognised in statement of profit and loss (` in million) Particulars Year ended Year ended 31 March 2018 31 March 2017 Current service cost 41.70 36.31 Interest cost 12.44 9.90 Past service cost 3.42 - Interest income (1.47) (0.52) 56.09 45.69 ii) Remeasurements recognised in other comprehensive income (` in million) Particulars Year ended Year ended 31 March 2018 31 March 2017 Actuarial (gain) / loss on defined benefit obligation (4.93) (3.64) Return on plan assets excluding interest income 0.58 (2.12) (4.35) (5.76) Annual Report 2017-18 153 Company Overview Statutory Reports Financial Statements Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) D. Plan Assets Plan assets comprises of the following: (` in million) Particulars As at As at 31 March 2018 31 March 2017 Government securities & debt instruments 20.51 19.56 The nature of assets allocation of plan assets is in government securities and debt instruments of high credit rating. E. Defined benefit obligation i) Actuarial assumptions The following are the principal actuarial assumptions at the reporting date (expressed as weighted averages): Principal actuarial assumptions As at As at 31 March 2018 31 March 2017 Attrition rate 38% 52% Discount rate 7% 8% Expected rate of return on plan assets 0.08 0.08 Mortality table IALM 2006-2008 IALM 2006-2008 Future salary increases First year 9%, 6% thereafter 6% Assumptions regarding future mortality are based on published statistics and mortality tables. As of 31 March 2018, the plan assets have been invested in insurer managed funds and the expected contributions to the fund during the year ending 31 March 2019, is approximately ` 74.93 million (31 March 2018: ` 198.1 million). Maturity profile of defined benefit obligation (` in million) Particulars Amount 1st following year 74.93 2nd following year 53.37 3rd following year 38.51 4th following year 27.04 5th following year 18.78 Year 6 to 10 30.70 At 31 March 2018, the average duration of the defined benefit obligations was 29.79 years (previous year: 27 years). ii) Sensitivity analysis Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown below. Particulars Year ended 31 March 2018 Year ended 31 March 2017 Increase Decrease Increase Decrease Discount rate (0.5% movement) (2.22) 2.28 (13.64) 15.34 Future salary increases (0.5% movement) 1.77 (1.74) 14.73 (13.26) Attrition rate (0.5% movement) (0.35) 0.35 3.35 (3.35) Mortality rate (10% movement) 0.01 (0.01) 1.47 (1.47) Although the analysis does not take account of the full distribution of cash flows expected under the plan, it does provide an approximation of the sensitivity of the assumptions shown. 154 Narayana Hrudayalaya Limited Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) 33. Due to Micro, Small and Medium Enterprises The Ministry of Micro, Small and Medium Enterprises has issued an office memorandum dated 26 August 2008 which recommends that the Micro and Small Enterprises should mention in their correspondence with its customers the Entrepreneurs Memorandum Number as allocated after filing of the Memorandum. Accordingly, the disclosure in respect of the amounts payable to such enterprises as at 31 March 2018 has been made in the financial statements based on information received and available with the Company. Further in view of the management, the impact of interest, if any, that may be payable in accordance with the provisions of the Micro, Small and Medium Enterprises Development Act, 2006 (‘The MSMED Act’) is not expected to be material. The Company has not received any claim for interest from any supplier. (` in million) Particulars As at As at 31 March 2018 31 March 2017 The amounts remaining unpaid to micro and small suppliers as at the end of the year -Principal 17.99 11.42 -Interest 0.17 0.07 The amount of interest paid by the buyer as per the MSMED Act - - The amount of payments made to micro and small suppliers beyond the appointed day - - during the accounting year; The amount of interest due and payable for the period of delay in making payment (which - - have been paid but beyond the appointed day during the year) but without adding the interest specified under the MSMED Act; The amount of interest accrued and remaining unpaid at the end of each accounting year 0.17 0.07 The amount of further interest remaining due and payable even in the succeeding years, until - - such date when the interest dues as above are actually paid to the small enterprise for the purpose of disallowance as a deductible expenditure under the MSMED Act 34. Prepaid expenses Expense prepaid to related party represents rent paid to Asia Heart Foundation amounting to ` 234.11 million (previous year: ` 249.90 million). During the year ended 31 March 2016, the Company had entered into an agreement with Asia Heart Foundation to pay ` 108.91 million by converting the future outflow of ` 1 million p.m. towards discount entitlement of 214 months into present value. ` 108.91 million is being amortized over the period of 214 months beginning from 1 April 2015. Prepaid expense includes rent paid to Modern Medical Institute amounting to ` 61.54 million (previous year: ` 66.16 million) which is being amortized over a period of 20 years from August 2011. 35. Leases The Company has taken various medical equipment , hospital premises, office and residential premises under operating leases. The leases typically run for a term ranging from one to twenty years, with an option to renew the lease after the term completion. The escalation clause in these arrangement ranges from 5% to 10%. (i) Future minimum lease payments under non-cancellable operating leases are as follows: (` in million) Particulars As at As at 31 March 2018 31 March 2017 Not later than 1 year 120.38 81.95 Later than 1 year and not later than 5 years 462.27 334.23 Later than 5 years 1,015.04 505.15 Annual Report 2017-18 155 Company Overview Statutory Reports Financial Statements Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) (ii) Amounts recognised in statement of profit and loss (` in million) Particulars For the year ended For the year ended 31 March 2018 31 March 2017 Cancellable lease expense 476.41 445.41 Non-cancellable lease expense 151.96 91.38 628.37 536.79 36. Earnings per share (EPS) Basic earnings per share The calculation of basic earnings per share for the year ended 31 March 2018 was based on profit attributable to equity shareholders of ` 584.22 million (previous year ` 951.09 million) and weighted average number of equity shares outstanding 202,564,923 (previous year: 202,361,490). Diluted earnings per share The calculation of diluted earnings per share for the year ended 31 March 2018 was based on profit attributable to equity shareholders of ` 584.22 million (previous year ` 951.09 million) and weighted average number of equity shares outstanding after adjustment for effects of all the dilutive potential equity shares 203,004,182 (previous year 202,835,183). (` in million, except no. of share) Earnings As at As at 31 March 2018 31 March 2017 Profit after tax 584.22 951.09 Weighted average number of equity shares (basic) Shares As at As at 31 March 2018 31 March 2017 Total no of shares outstanding 204,360,804 204,360,804 Effect of Treasury shares 1,836,567.5 (1,999,314) Weighted average number of equity shares for the year 202,524,236.5 202,361,490 Weighted average number of equity shares ( diluted) Shares As at As at 31 March 2018 31 March 2017 Weighted average number of equity shares( basic) 202,524,236.5 202,361,490 Effect of exercise of share option 439,259 473,693 Weighted average number of equity shares ( diluted) for the year 2,02,963,495.5 202,835,183 Basic earnings per share (`) 2.88 4.70 Diluted earnings per share(`) 2.88 4.69 ( Nominal value per share ` 10) 156 Narayana Hrudayalaya Limited Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) 37. Income tax (a) Amount recognised in statement of profit and loss (` in million) Particulars For the year ended For the year ended 31 March 2018 31 March 2017 Current income tax 219.78 509.19 MAT credit entitlement* (219.78) - Deferred tax charge/ (credit), net Origination and reversal of temporary differences 369.92 12.99 Deferred tax charge/ (credit) 369.92 12.99 Tax expense for the year 369.92 522.18 (b) Amount recognised in other comprehensive income (` in million) Particulars For the year ended 31 March 2018 For the year ended 31 March 2017 Before tax Tax (expense) Net of tax Before tax Tax (expense) Net of tax benefit benefit Items that will not be reclassified subsequently to profit or loss Re-measurement on defined benefit 4.35 (1.51) 2.84 5.76 (1.96) 3.80 plans Items that will be reclassified subsequently to profit or loss The effective portion of gains /(loss) on (11.39) 3.94 (7.45) - - - hedging instruments in a cash flow hedge (7.04) 2.43 (4.61) 5.76 (1.96) 3.80 (c) Reconciliation of effective tax rate (` in million) Particulars For the year ended For the year ended 31 March 2018 31 March 2017 Profit before tax 954.14 1,473.26 Tax using the Company’s domestic tax rate (Current year 34.61% and Previous Year 34.61%) 330.23 509.90 Tax effect of: Non-deductible tax expenses 45.54 18.39 Share issue expense allowed as deduction (5.85) (5.85) Others - (0.26) 369.92 522.18 Annual Report 2017-18 157 Company Overview Statutory Reports Financial Statements Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) (d) Recognised deferred tax assets and liabilities (i) Deferred tax assets and liabilities are attributable to the followings: (` in million) Particulars As at As at 31 March 2018 31 March 2017 Deferred tax asset Provision for doubtful receivables 65.17 40.08 Provision for gratuity 67.81 53.91 Provision for compensated absences 49.35 33.43 Provision for diminution in the long term investment 3.82 16.41 On non current financial liabilities 7.48 9.51 On land indexation of freehold land 18.73 18.73 On security deposit at amortised cost 11.32 9.80 On brought forward loss 445.01 - Others 43.72 36.69 Total deferred tax asset 712.41 218.56 Deferred tax liability Excess of depreciation on fixed asset under Income Tax Act, 1961 over depreciation under (1,309.54) (448.21) Companies Act. Total deferred tax liability (1,309.54) (448.21) Minimim alternative tax assets* 219.78 - Deferred tax liability (net) (377.35) (229.65) *During the year the company has loss as per normal provision of Income Tax Act, 1961 and so liable to pay tax as per Minimum Alternative tax ( MAT) under section 115 JB of Income Tax Act, 1961. As per Section 115 JAA of Income Tax Act,1961, MAT assets can be forward to 15 years from Assesment year 2018-19, subject to earlier utilization by the company. (ii) Movement in temporary differences (` in million) Particulars Balances as at Recognised in Recognise in OCI Balances as at 1 April 2017 Profit and loss during 2017-18 31 March 2018 during 2017-18 Provision for doubtful receivables 40.08 25.09 - 65.17 Provision for gratuity 53.91 11.47 2.43 67.81 Provision for compensated absences 33.43 15.92 - 49.35 Provision for diminution in the long term 16.41 (12.59) - 3.82 investment On non current financial liabilities 9.51 (2.03) - 7.48 On land indexation of freehold land 18.73 - - 18.73 On security deposit at amortised cost 9.80 1.52 - 11.32 On brought forward loss as per section - 445.01 445.01 35 AD of Income Tax Act, 1961 Others 36.69 7.03 - 43.72 Excess of depreciation on fixed asset (448.21) (861.33) - (1,309.54) under Income Tax Act, 1961 over depreciation under Companies Act. Mat Credit Entitlement - 219.78 - 219.78 (229.65) (150.13) 2.43 (377.35) 158 Narayana Hrudayalaya Limited Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) 38. Liquidation of Narayana Hrudayalaya Hospitals Malaysia SDN. BHD During the year ended 31 March 2018, Narayana Hrudayalaya Hospitals Malaysia SDN. BHD, a 100% subsidiary has been liquidated and company received ` 14.87 million against the investment of ` 14.10 million ( net of provision other than temporary diminution of ` 36.38 million). The liquidation process was completed on 24 April 2018. 39. Share based payments During the year ended 31 March 2016, the Company introduced the NH ESOP 2015 (“NH ESOP”) for the benefit of the employees of the Company, its subsidiaries and associates, as approved by the Board of Directors in its meeting held on 12 September 2015. NH ESOP 2015 provides for the creation and issue of 2,040,000 share options that would eventually convert into equity shares of ` 10 each in the hands of the employees of the Company, its subsidiaries and associate. The options are to be granted to the eligible employees as per the eligibility criteria as determined by the Nomination and Remuneration Committee at its sole discretion. The share options vest in a graded manner over a period of four years and are exercisable in one or more tranches within a period of four years from the date of first vesting, failing which the options shall lapse. Pursuant to NH ESOP, the Company granted 805,670 share options till 31 March 2018 (previous year: 805,670). The Stock compensation cost is computed under the Fair value method. For the year ended 31 March 2018, the Company has recorded stock compensation expenses of ` 42.01 million(previous year: ` 58.73 million ) and liability as on 31 March 2018 is ` 134.35 million ( previous year: 92.34 million). The activity in this stock option plan is summarized below: Particulars As at As at 31 March 2018 31 March 2017 Outstanding as at the beginning of the year (Nos.) 772,123 805,670 Option granted during the year (Nos.) - - Forfeited during the year( Nos.) (990) (1,100) Exercised during the year( Nos.) (54,020) (32,447) Expired during the year(Nos.) - - Outstanding at the end of the year(Nos.) 717,113 772,123 Exercisable at the end of the year(Nos.) - - Weighted average share price at the date of exercise (`) 297.15 336.23 The weighted average remaining contractual life for the stock options outstanding as at 31 March 2018 is 2.50 years (previous year: 3.50 years). The exercise price for the stock options outstanding as at 31 March 2018 is ` 10 (previous year : ` 10). Fair value presentation Options have been valued based on fair value method as described under IND AS 102 Share Based Payments using Black Scholes valuation options-pricing model, using the fair value of the Company’s shares as on the grant date. Particulars As at As at 31 March 2018 31 March 2017 No. of options granted (Nos.) 805,670 805,670 Date of grant 1 October 2015 1 October 2015 Vesting period (years) 4 4 Expected life of option (years) 5 5 Expected volatility 35% 35% Risk free rate 7.63% 7.63% Expected dividends expressed as a dividend yield - - Weighted-average fair values of options per shares (`) 208.73 208.73 Annual Report 2017-18 159 Company Overview Statutory Reports Financial Statements Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) 40. (A) Exceptional items (i) Exceptional item for the year ended 31 March 2018 represents loss of ` 11.58 million on impairment of investment in its associate “Trimedx India Private Limited”. (ii) Exceptional item for the previous year ended 31 March 2017 amounting to ` 31.91 million represents loss on sale of its investment in wholly owned subsidiary “Asia Healthcare Development Limited” through a sale agreement dated 10 November 2016 and Company received ` 3.83 million as sales consideration. (B) Proceeds from slump sale The Company entered into a business transfer agreement on 1 April 2016 (‘the Agreement’) with Chandramma Educational Society for sale of its business on a slump sale basis, without values being assigned to the individual assets and liabilities. As per the terms of the agreement, the Company had sold the assets and liabilities pertaining to health care business of Hyderabad unit for an aggregate consideration of ` 157.50 million and received ` 155.70 million during the previous financial year as the final sales consideration. 41. Business Combination On 21 April 2017, Pursuant to approval by the Committee formed by the Board of Directors, the Company signed a Share Purchase Agreement (‘SPA’) and acquired 100% equity and preference shares in NewRise Healthcare Private Limited (‘NewRise’), a wholly owned subsidiary of Panacea Biotech Limited for a consideration of ` 756.40 million paid in cash. Further, as per the Order dated 04 October 2017 from Ministry of Corporate Affairs, the amalgamation of NewRise with the Company was approved under Section 233 of the Companies Act, 2013 and NewRise was amalgamated with Company w.e.f. 21 April 2017. The purchase price has been allocated as follows: Component Acquisition date fair value ( ` in million) Assets Tangible Assets 181.04 Capital Work In Progress 1,612.83 Other Non-Current Assets 0.14 Current Assets 15.89 Total Assets 1,809.90 Liabilities Long- term borrowings 780.85 Long- term provisions 0.67 Current liabilities 271.98 Total Liabilities 1,053.50 Fair Value of Net Assets acquired 756.40 42. Service Concession Arrangement. The Company had entered into an agreement with National Rural Health Mission, Assam (NRHM) on 16 August 2012 (“effective date”) to set up a super specialty hospital and to operate and manage such hospital for a period of 30 years. As per the agreement, NRHM will provide ` 220.00 million in three installments over a period of 1 year during execution of the project besides the existing hospital building on as is where is basis. The Company has received ` 220.00 million as it met all the conditions related to the grants. As per the terms of the agreement, the Company has entered into lease agreement with NRHM for existing building and land for a lease period of 30 years. Also, as per the agreement not less than 50% of the hospitals beds shall be charged at 1.85% below the National Accreditation Board for Hospitals and Healthcare Providers (NABH) accredited hospital rates applicable. All the surgical, observational and 160 Narayana Hrudayalaya Limited Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) other procedures for which super speciality rates are available in Central Government Health Scheme (CGHS) schedule, such rates quoted in CGHS schedule shall apply and for which it is not available, NABH accredited hospital rates shall be applicable. The Company has established a super-speciality hospital providing all the necessary services and for that it has to bear all the expenses in setting up the facilities mentioned in the agreement and thereafter run the hospitals on a day to day basis. The term of the agreement is to commence on the effective date and will continue until the expiration of 30 years on 15th August 2042. Thereafter, this agreement shall be renewed for such additionals periods and on such terms and conditions as may be mutually agreed to by the parties to the agreement. The agreement can be terminated by the both the parties by mutual written agreement or if the other party breaches or fails to perform any of the covenants of the agreement or if any representation or warranty of the other party under this agreement shall have become untrue. Also, there is no addendum to this agreement. 43. Capital management The Company’s policy is to maintain a stable capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Management monitors capital on the basis of return on capital employed as well as the debt to total equity ratio. For the purpose of debt to total equity ratio, debt considered is long-term and short-term borrowings. Total equity comprise of issued share capital and all other equity reserves. The capital structure as of 31 March 2018 and 31 March 2017 was as follows: (` in million) Particulars As at As at 31 March 2018 31 March 2017 Total equity attributable to the equity shareholders of the Company 11,206.88 10,584.72 As a percentage of total capital 70% 90% Long-term borrowings including current maturities 4,636.45 1,150.39 Short-term borrowings 277.79 44.88 Total borrowings 4,914.24 1,195.27 As a percentage of total capital 30% 10% Total capital (Equity and Borrowings) 16,121.12 11,779.99 44. Financial instruments: Fair value and risk managements A. Accounting classification and fair values (` in million) As at 31 March 2018 Fair Value Total Level 1 Level 2 Level 3 Total Financial assets Amortised cost Trade receivables 1,850.66 - - - - Cash and cash equivalents 200.58 - - - - Bank balances other than above 13.80 - - - - Loans 527.25 - - - - Other financial assets 199.07 - - - - Fair value through profit and loss (FVTPL) Guarantees in subsidiaires (investments) 33.10 - 33.10 - 33.10 2,824.46 - 33.10 - 33.10 Annual Report 2017-18 161 Company Overview Statutory Reports Financial Statements Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) (` in million) As at 31 March 2018 Fair Value Total Level 1 Level 2 Level 3 Total Financial liabilities Amortised cost Borrowings 4,748.54 - - - - Trade payables 2,236.93 - - - - Other financial liabilities 540.92 - - - - Fair value through OCI (FVOCI) Interest rate swap (other financial liabilities) 11.39 - 11.39 - 11.39 7,537.78 - 11.39 - 11.39 (` in million) As at 31 March 2017 Fair Value Total Level 1 Level 2 Level 3 Total Financial assets Amortised cost Trade receivables 1,376.16 - - - - Cash and cash equivalents 206.99 - - - - Bank balances other than above 74.58 - - - - Loans 562.55 - - - - Other financial assets 414.82 - - - - 2,635.10 - - - - Financial liabilities Amortised cost Borrowings 1,001.91 - - - - Trade payables 1,703.14 - - - - Other financial liabilities 679.71 - - - - 3,384.76 - - - - Measurement of fair values The carrying value of all financial assets approximates the fair value. B. Financial risk management The Company’s activities expose it to a variety of financial risks: credit risk, market risk and liquidity risk. (i) Risk management framework The Company’s risk management is carried out by a central treasury department under policies approved by the Board of Directors. The Board supervises overall risk management, as well as policies covering specific areas, such as foreign exchange risk, credit risk and use of financial instruments. (ii) Credit risk Credit risk is the risk that the counterparty will not meet its obligation under a financial instrument or customer contract, leading to financial loss. The credit risk arises principally from its operating activities (primarily trade receivables) and from its investing activities, including deposits with banks and financial institutions and other financial instruments. Credit risk is controlled by analysing credit limits and creditworthiness of customers on a continuous basis to whom credit has been granted after obtaining necessary approvals for credit. The collection from the trade receivables are monitored on a continuous basis by the receivables team. 162 Narayana Hrudayalaya Limited Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) The Company establishes an allowance for credit loss that represents its estimate of expected losses in respect of trade and other receivables based on the past and the recent collection trend. The maximum exposure to credit risk as at reporting date is primarily from trade receivables amounting to ` 1850.66 million (31 March,2016 : ` 1376.16 million). The movement in allowance for credit loss in respect of trade and other receivables during the year was as follows: (` in million) Allowance for credit loss As at As at 31 March 2018 31 March 2017 Opening balance 115.81 175.05 Credit loss recognised / (reversed) 72.50 (59.24) Closing balance 188.31 115.81 No single customer accounted for more than 10% of the revenue as of 31 March 2018 and 31 March 2017 . There is no significant concentration of credit risk. Credit risk on cash and cash equivalents is limited as the Company generally transacts with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. (iii) Liquidity risk Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation. In addition, the Company maintains line of credit as stated in Note 15. The table below provides details regarding the undiscounted contractual maturities of significant financial liabilities as of 31 March 2018: (` in million) Particulars Less than 1 1 - 2 years 2 - 5 years more than 5 Total year years Borrowings 277.79 373.40 1,600.47 2,496.88 4,748.54 Trade payables 2,236.93 - - - 2,236.93 Other financial liabilities 384.03 15.79 43.49 109.00 552.31 Total 2,898.75 389.19 1,643.96 2,605.88 7,537.78 The table below provides details regarding the undiscounted contractual maturities of significant financial liabilities as of 31 March 2017: (` in million) Particulars Less than 1 1 - 2 years 2 - 5 years more than 5 Total year years Borrowings 44.88 159.57 271.67 525.79 1,001.91 Trade payables 1,703.14 - - - 1,703.14 Other financial liabilities 620.52 - - 59.19 679.71 Total 2,368.54 159.57 271.67 584.98 3,384.76 (iv) Market risk Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices, such as foreign exchange rates, interest rates and equity prices. (a) Foreign currency risk The Company is exposed to currency risk to the extent that there is a mismatch between the currencies in which sales, purchases and borrowings are denominated and the respective functional currencies of the company. The functional currency of company is `. The currencies in which these transactions are primarily denominated is US dollars. Annual Report 2017-18 163 Company Overview Statutory Reports Financial Statements Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) The summary quantitative data about the Company’s exposure to currency risk (based on notional amounts) as reported to the management is as follows. As at 31 March 2018 (USD in million) Financial assets Trade receivables 1.19 Cash and cash equivalents 0.73 Other financial assets 0.46 Financial liabilities Borrowings 25.00 Trade payables 0.12 Other financial liabilities - Net assets / (liabilities) (22.74) As at 31 March 2017 (USD in million) Financial assets Trade receivables 1.04 Cash and cash equivalents 0.70 Other financial assets 0.68 Financial liabilities Borrowings 2.25 Trade payables 0.31 Other financial liabilities 0.01 Net assets / (liabilities) (0.15) (b) Sensitivity analysis The sensitivity of profit or loss to changes in exchange rates arises mainly from foreign currency denominated financial instruments. (` in million) Particulars Impact on profit or (loss) before tax As at As at 31 March 2018 31 March 2017 USD Sensitivity `/USD - Increase by 1% (14.79) (0.99) `/USD - Decrease by 1% 14.79 0.99 (c) Cash flow and fair value interest rate risk The Company’s main interest rate risk arises from long-term borrowings with variable rates, which expose the Company to cash flow interest rate risk. (i) Interest rate risk exposure Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. In order to optimize the Company’s position with regard to interest income and interest expenses and to manage the interest rate risk, treasury performs a comprehensive corporate interest rate risk management by balancing the proportion of fixed rate and floating rate financial instruments in its total portfolio. Type of Derivative No. of Contracts As at 31 March 2018 As at 31 March 2017 Amount Hedged Fair Value Amount Hedged Fair Value (in USD million) (INR million) (in USD million) (INR million) Interest Rate Swap 1 25.00 (11.39) - - 164 Narayana Hrudayalaya Limited Notes to the standalone financial statements for the year ended 31 March 2018 (Continued) The Company has entered into derivative financial instruments with a counter-party (bank) with investment grade credit ratings. Derivatives valued using valuation techniques with market observable inputs are mainly interest rate swaps. The most frequently applied valuation techniques include swap models using present value calculations. The models incorporate various inputs including the credit quality of counterparties, interest rate curves and forward rate curves of the underlying. As at March 31, 2018, the changes in counterparty credit risk had no material effect on the hedge effectiveness assessment for derivatives designated in hedge relationships and other financial instruments recognized at fair value. Exposure to Interest Rate Company’s Interest rate rise arises from borrowings. The Following table demonstrates the sensitivity on the company’s profit before tax to a reasonably possible change in interest rates on that position of loans and borrowings affected, with other variables held constant. (` in million) Particulars As at As at 31 March 2018 31 March 2017 Borrowings 3,010.35 1,150.39 Total borrowings 3,010.35 1,150.39 (ii) Sensitivity (` in million) Particulars Impact on profit or (loss) before tax As at As at 31 March 2018 31 March 2017 Sensitivity 1% increase in MCLR rate 30.10 11.50 1% decrease in MCLR rate (30.10) (11.50) The interest rate sensitivity is based on the closing balance of secured term loans from banks. 45. Reclassification and comparative figures Certain reclassifications have been made to the prior year’s financial statements to enhance comparability with the current year’s financial statements. The company had classified accrued salaries and benefits under Other financial liabilities - Current in the financial statement for the previous year. However , in the current year the same has been reclassified to Trade payable appearing in note 19. The impact on reclassification is given below: (` in million) Particulars Previously reported Amount After reclassification 31 March 2017 reclassified 31 March 2017 Other financial Liabilities 784.78 (164.26) 620.52 Trade payables 1,538.88 164.26 1,703.14 The Management believes that the impact of the above reclassifications is not material. for and on behalf of the Board of Directors of Narayana Hrudayalaya Limited Dr. Ashutosh Raghuvanshi Viren Shetty Managing Director Whole -time Director DIN: 02775637 DIN: 02144586 Kesavan Venugopalan Sridhar S Chief Financial Officer Company Secretary Place: Bengaluru Date: 29 May 2018 Annual Report 2017-18 165 Company Overview Statutory Reports Financial Statements Independent Auditor’s Report To the Members of We conducted our audit in accordance with the Standards on Narayana Hrudayalaya Limited Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements Report on the Consolidated Financial Statements and plan and perform the audit to obtain reasonable assurance We have audited the accompanying consolidated financial about whether the consolidated financial statements are free statements of Narayana Hrudayalaya Limited (hereinafter from material misstatement. referred to as “the Parent”) and its subsidiaries (the Parent and its subsidiaries together referred to as “the Group”), An audit involves performing procedures to obtain audit evidence which includes the Group’s share of loss in its associates, about the amounts and the disclosures in the consolidated comprising the Consolidated Balance Sheet as at March 31, financial statements. The procedures selected depend on the 2018, the Consolidated Statement of Profit and Loss (including auditor’s judgment, including the assessment of the risks of other comprehensive income), the Consolidated Cash Flow material misstatement of the consolidated financial statements, Statement, the Consolidated Statement of Changes in Equity, for whether due to fraud or error. In making those risk assessments, the year then ended, and a summary of the significant accounting the auditor considers internal financial control relevant to the policies and other explanatory information (hereinafter referred Parent’s preparation of the consolidated financial statements to as “the consolidated financial statements”). that give a true and fair view in order to design audit procedures Management’s Responsibility for the Consolidated that are appropriate in the circumstances. An audit also includes Financial Statements evaluating the appropriateness of the accounting policies used The Parent’s Board of Directors is responsible for the preparation and the reasonableness of the accounting estimates made by of these consolidated financial statements in terms of the the Parent’s Board of Directors, as well as evaluating the overall requirements of the Companies Act, 2013 (hereinafter referred presentation of the consolidated financial statements. to as “the Act”) that give a true and fair view of the consolidated We believe that the audit evidence obtained by us and the audit financial position, consolidated financial performance including evidence obtained by the other auditors in terms of their reports other comprehensive income, consolidated cash flows and referred to in sub-paragraphs (a) and (b) of the Other Matters consolidated statement of changes in equity of the Group paragraph below is sufficient and appropriate to provide a basis including its Associates in accordance with the Indian Accounting for our audit opinion on the consolidated financial statements. Standards (“Ind AS”) prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, Opinion 2015, as amended, and other accounting principles generally In our opinion and to the best of our information and according accepted in India. to the explanations given to us and based on the consideration The respective Board of Directors of the companies included in of reports of other auditors on separate financial statements/ the Group and of its associates are responsible for maintenance financial information of the subsidiaries and associates of adequate accounting records in accordance with the referred to below in the Other Matters paragraph, the aforesaid provisions of the Act for safeguarding the assets of the Group consolidated financial statements give the information required and its associates and for preventing and detecting frauds and by the Act in the manner so required and give a true and fair view other irregularities; the selection and application of appropriate in conformity with the Ind AS and other accounting principles accounting policies; making judgments and estimates that are generally accepted in India, of the consolidated state of affairs reasonable and prudent; and the design, implementation and of the Group as at March 31, 2018, and their consolidated profit, maintenance of adequate internal financial controls, that were consolidated total comprehensive income, their consolidated operating effectively for ensuring the accuracy and completeness cash flows and consolidated statement of changes in equity for of the accounting records, relevant to the preparation and the year ended on that date. presentation of the consolidated financial statements that give Other Matters a true and fair view and are free from material misstatement, (a) We did not audit the financial statements of two whether due to fraud or error, which have been used for the subsidiaries, whose financial statements reflect total purpose of preparation of the consolidated financial statements assets of ` 5,384.30 Million as at March 31, 2018, total by the Directors of the Parent, as aforesaid. revenues of ` 773.12 Million, total net profit after tax of Auditor’s Responsibility ` 53.89 Million, total comprehensive income of ` 48.82 Our responsibility is to express an opinion on these consolidated Million and net cash outflows amounting to ` 51.14 financial statements based on our audit. In conducting our Million for the year ended on that date, as considered in audit, we have taken into account the provisions of the Act, the consolidated financial statements. The consolidated the accounting and auditing standards and matters which are financial statements also include the Group’s share of net required to be included in the audit report under the provisions profit of ` 0.51 Million for the year ended March 31, 2018, of the Act and the Rules made thereunder. as considered in the consolidated financial statements, in 166 Narayana Hrudayalaya Limited Independent Auditor’s Report (Contd.) respect of two associates, whose financial statements have Statement and Consolidated Statement of Changes in not been audited by us. These financial statements have Equity dealt with by this Report are in agreement with the been audited by other auditors whose reports have been relevant books of account maintained for the purpose of furnished to us by the Management and our opinion on the preparation of the consolidated financial statements. consolidated financial statements, in so far as it relates to (d) In our opinion, the aforesaid consolidated financial the amounts and disclosures included in respect of these statements comply with the Indian Accounting Standards subsidiaries and associates, and our report in terms of sub- prescribed under Section 133 of the Act. section (3) of Section 143 of the Act, in so far as it relates to the aforesaid subsidiaries and associates is based solely (e) On the basis of the written representations received from on the reports of the other auditors. the directors of the Parent as on March 31, 2018 taken on record by the Board of Directors of the Parent and the reports (b) We did not audit the financial information of one subsidiary, of the statutory auditors of its subsidiary companies, none whose financial financial information reflects total assets of of the directors of the Parent and its subsidiary companies ` Nil as at March 31, 2018, total revenues of ` Nil, total net incorporated in India is disqualified as on March 31, 2018 loss after tax of ` 0.24 Million, total comprehensive loss of from being appointed as a director in terms of Section 164 ` 0.24 Million and net cash outflows amounting to ` 14.90 (2) of the Act. Million for the year ended on that date, as considered in the consolidated financial statements. The consolidated (f) With respect to the adequacy of the internal financial financial statements also include the Group’s share controls over financial reporting and the operating of net loss of ` 46.86 Million for the year ended March effectiveness of such controls, refer to our separate report 31, 2018, as considered in the consolidated financial in “Annexure A”, which is based on the auditors’ reports statements, in respect of one associate, whose financial of the Parent, and subsidiary companies incorporated in information has not been audited by us. These financial India. Our report expresses an unmodified opinion on the information are unaudited and have been furnished to us adequacy and operating effectiveness of internal financial by the Management and our opinion on the consolidated controls over financial reporting of those companies, for the financial statements, in so far as it relates to the amounts reasons stated therein. and disclosures included in respect of this subsidiary and (g) With respect to the other matters to be included in associate, is based solely on such unaudited financial the Auditor’s Report in accordance with Rule 11 of information. In our opinion and according to the information the Companies (Audit and Auditor’s) Rules, 2014, as and explanations given to us by the Management, these amended, in our opinion and to the best of our information financial information are not material to the Group. and according to the explanations given to us: Our opinion on the consolidated financial statements above i. The consolidated financial statements disclose the and our report on Other Legal and Regulatory Requirements impact of pending litigations on the consolidated below, is not modified in respect of the above matters with financial position of the Group. respect to our reliance on the work done and the reports of the other auditors and the financial information certified by ii. Provision has been made in the consolidated financial the Management. statements, as required under the applicable law or Report on Other Legal and Regulatory Requirements accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative As required by Section 143(3) of the Act, we report, to the extent contracts. applicable, that: iii. There were no amounts which were required to be (a) We have sought and obtained all the information and transferred to the Investor Education and Protection explanations which to the best of our knowledge and Fund by the Parent. belief were necessary for the purposes of our audit of the aforesaid consolidated financial statements. For DELOITTE HASKINS & SELLS LLP (b) In our opinion, proper books of account as required by Chartered Accountants law relating to preparation of the aforesaid consolidated (Firm’s Registration No. 117366W/W-100018) financial statements have been kept so far as it appears from our examination of those books. V. Balaji (c) The Consolidated Balance Sheet, the Consolidated Partner Statement of Profit and Loss (including Other Comprehensive Income), the Consolidated Cash Flow Bangalore, May 29, 2018. (Membership No 203685) Annual Report 2017-18 167 Company Overview Statutory Reports Financial Statements Annexure “A” to the Independent Auditor’s Report (Referred to in paragraph (f) under ‘Report on Other controls. Those Standards and the Guidance Note require that Legal and Regulatory Requirements’ of our report of we comply with ethical requirements and plan and perform the even date) audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established Report on the Internal Financial Controls Over and maintained and if such controls operated effectively in all Financial Reporting under Clause (i) of Sub-section material respects. 3 of Section 143 of the Companies Act, 2013 (“the Act”) Our audit involves performing procedures to obtain audit evidence In conjunction with our audit of the consolidated financial about the adequacy of the internal financial controls system over statements of the Company as of and for the year ended March financial reporting and their operating effectiveness. Our audit 31, 2018, we have audited the internal financial controls over of internal financial controls over financial reporting included financial reporting of Narayana Hrudayalaya Limited (hereinafter obtaining an understanding of internal financial controls over referred to as the “Parent”) and its subsidiary companies, which financial reporting, assessing the risk that a material weakness are companies incorporated in India, as of that date. exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Management’s Responsibility for Internal Financial The procedures selected depend on the auditor’s judgement, Controls including the assessment of the risks of material misstatement of The respective Board of Directors of the Parent and its subsidiary the financial statements, whether due to fraud or error. companies which are companies incorporated in India, are responsible for establishing and maintaining internal financial We believe that the audit evidence we have obtained is sufficient controls based on the internal control over financial reporting and appropriate to provide a basis for our audit opinion on the criteria established by the respective companies considering the internal financial controls system over financial reporting of the essential components of internal control stated in the Guidance Parent and its subsidiary companies, which are companies Note on Audit of Internal Financial Controls Over Financial incorporated in India. Reporting issued by the Institute of Chartered Accountants of India (ICAI). These responsibilities include the design, Meaning of Internal Financial Controls Over Financial implementation and maintenance of adequate internal financial Reporting controls that were operating effectively for ensuring the orderly A company’s internal financial control over financial reporting and efficient conduct of its business, including adherence to the is a process designed to provide reasonable assurance respective company’s policies, the safeguarding of its assets, regarding the reliability of financial reporting and the preparation the prevention and detection of frauds and errors, the accuracy of financial statements for external purposes in accordance and completeness of the accounting records, and the timely with generally accepted accounting principles. A company’s preparation of reliable financial information, as required under internal financial control over financial reporting includes those the Companies Act, 2013. policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect Auditor’s Responsibility the transactions and dispositions of the assets of the company; Our responsibility is to express an opinion on the internal (2) provide reasonable assurance that transactions are recorded financial controls over financial reporting of the Parent and its as necessary to permit preparation of financial statements in subsidiary companies which are companies incorporated in accordance with generally accepted accounting principles, and India, based on our audit. We conducted our audit in accordance that receipts and expenditures of the company are being made with the Guidance Note on Audit of Internal Financial Controls only in accordance with authorisations of management and Over Financial Reporting (the “Guidance Note”) issued by the directors of the company; and (3) provide reasonable assurance Institute of Chartered Accountants of India and the Standards on regarding prevention or timely detection of unauthorised Auditing, prescribed under Section 143(10) of the Companies acquisition, use, or disposition of the company’s assets that Act, 2013, to the extent applicable to an audit of internal financial could have a material effect on the financial statements. 168 Narayana Hrudayalaya Limited Annexure “A” to the Independent Auditor’s Report (Contd.) Inherent Limitations of Internal Financial Controls system over financial reporting and such internal financial Over Financial Reporting controls over financial reporting were operating effectively as Because of the inherent limitations of internal financial controls at March 31, 2018, based on the internal control over financial over financial reporting, including the possibility of collusion reporting criteria established by the respective companies or improper management override of controls, material considering the essential components of internal control stated misstatements due to error or fraud may occur and not be in the Guidance Note on Audit of Internal Financial Controls detected. Also, projections of any evaluation of the internal Over Financial Reporting issued by the Institute of Chartered financial controls over financial reporting to future periods are Accountants of India. subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. For DELOITTE HASKINS & SELLS LLP Chartered Accountants Opinion (Firm’s Registration No. 117366W/W-100018) In our opinion to the best of our information and according to the explanations given to us, the Parent and its subsidiary V. Balaji companies, which are companies incorporated in India, have, Partner in all material respects, an adequate internal financial controls Bangalore, May 29, 2018. (Membership No 203685) Annual Report 2017-18 169 Company Overview Statutory Reports Financial Statements Consolidated Balance Sheet (` in million) Note As at As at Particulars No. 31 March 2018 31 March 2017 ASSETS Non-current assets Property, plant and equipment 4 17,116.68 10,209.45 Capital work-in-progress 4 350.44 530.36 Goodwill 4 660.47 581.47 Other intangible assets 4 702.82 26.92 Equity accounted investees 5 37.49 928.28 Financial assets Investments 6 50.29 32.54 Loans 7 (a) 424.89 202.56 Other financial assets 8 (a) 1.26 20.00 Income tax assets ( net ) 9 316.98 198.75 Deferred tax assets 50 80.43 - Other non-current assets 10 (a) 821.27 721.81 Total non-current assets 20,563.02 13,452.14 Current assets Inventories 11 836.24 523.60 Financial assets Trade receivables 12 2,789.76 1,569.10 Cash and cash equivalents 13 (a) 333.29 262.43 Bank balances other than (ii) above 13 (b) 19.25 78.77 Loans 7 (b) 82.26 30.07 Other financial assets 8 (b) 138.94 352.71 Other current assets 10 (b) 593.19 199.12 Total current assets 4,792.93 3,015.80 TOTAL ASSETS 25,355.95 16,467.94 EQUITY AND LIABILITIES Equity Equity share capital 14 (a) 2,043.61 2,043.61 Other Equity 14 (b) 8,313.86 7,587.21 Equity attributable to owners of the Company 10,357.47 9,630.82 Non-controlling interests 15 2.91 2.36 Total equity 10,360.38 9,633.18 Non-current liabilities Financial liabilities Borrowings 16 (a) 6,963.32 1,798.01 Other financial liabilities 17 (a) 1,044.80 59.19 Provisions 18 (a) 144.42 150.84 Deferred tax liabilities (net) 50 395.73 248.03 Other non-current liabilities 19 (a) 1,349.64 1,353.13 Total non-current liabilities 9,897.91 3,609.20 Current liabilities Financial liabilities Borrowings 16 (b) 375.81 90.22 Trade payables 20 2,961.92 2,065.81 Other financial liabilities 17 (b) 1,088.91 692.79 Provisions 18 (b) 242.54 122.23 Other current liabilities 19 (b) 428.48 254.08 Income tax liabilities (net) 21 - 0.43 Total current liabilities 5,097.66 3,225.56 TOTAL EQUITY AND LIABILITIES 25,355.95 16,467.94 Significant accounting policies 3 The notes referred to above form an integral part of the consolidated financial statements As per our report of even date attached for Deloitte Haskins & Sells LLP for and on behalf of the Board of Directors of Chartered Accountants Narayana Hrudayalaya Limited V.Balaji Dr. Ashutosh Raghuvanshi Viren Shetty Partner Managing Director Whole -time Director DIN: 02775637 DIN: 02144586 Kesavan Venugopalan Sridhar S Chief Financial Officer Company Secretary Place: Bengaluru Place: Bengaluru Date: 29 May 2018 Date: 29 May 2018 170 Narayana Hrudayalaya Limited Consolidated Statement of Profit and Loss (` in million) Note For the year ended For the year ended Particulars No. 31 March 2018 31 March 2017 Revenue from operations 22 22,809.07 18,781.65 Other income 23 189.00 174.82 Total income (A) 22,998.07 18,956.47 Purchase of medical consumables, drugs and surgical equipments 5,690.24 4,388.79 Changes in inventories of medical consumables, drugs and surgical equipments (Increase) / decrease 24 (125.21) (29.81) Employee benefit expenses 25 4,656.86 3,752.10 Professional fees to doctors 4,787.77 3,855.73 Other expenses 26 5,676.76 4,526.28 Expenses before finance costs, depreciation and amortisation and 20,686.42 16,493.09 exceptional items (B) Earnings before finance cost, depreciation and amortisation, exceptional 2,311.65 2,463.38 items and tax (A-B) Finance costs (C) 27 467.55 218.03 Depreciation and amortisation expense (D) 28 999.50 799.21 1,467.05 1,017.24 Total expense (E) = (B+C+D) 22,153.47 17,510.33 Profit before exceptional items and tax (F) = (A-E) 844.60 1,446.14 Exceptional items (G) (refer note 44) 5.41 (13.40) Profit before share of ( loss ) of equity accounted investees and income tax 850.01 1,432.74 (H) = (F+G) Share of (loss) of equity accounted investees (I) (46.35) (79.34) Profit before tax (J) = (H+I) 803.66 1,353.40 Tax expenses: Current tax 219.78 509.19 Less : MAT credit entitlement (219.78) 14.47 Deferred tax charge 289.64 - Total tax expense (K) 289.64 523.66 Profit for the year (L) = (J-K) 514.02 829.74 Other comprehensive income (OCI) Items that will not be reclassified to profit or loss Re-measurement of defined benefit plans 3.39 2.31 Income tax effect (1.35) (1.96) Items that will be reclassified subsequently to profit or loss Effective portion of gains or (losses) in cash flow hedge (16.46) - Income tax effect 3.94 - Exchange differences in translating the financial statement of foreign operations. 45.27 - Other comprehensive income for the year, net of tax 34.79 0.35 Total comprehensive income for the year 548.81 830.09 Profit attributable to: Owners of the Company 513.47 830.53 Non-controlling interest 0.55 (0.79) Profit for the year 514.02 829.74 Other comprehensive income attributable to: Owners of the Company 34.79 0.37 Non-controlling interest (0.00) (0.02) Other comprehensive income for the year 34.79 0.35 Total comprehensive income attributable to: Owners of the Company 548.26 830.90 Non-controlling interest 0.55 (0.81) Total comprehensive income for the year 548.81 830.09 Earnings per share 43 Basic (`) 2.53 4.10 Diluted (`) 2.53 4.09 Significant accounting policies 3 The notes referred to above form an integral part of the consolidated financial statements As per our report of even date attached for Deloitte Haskins & Sells LLP for and on behalf of the Board of Directors of Chartered Accountants Narayana Hrudayalaya Limited V.Balaji Dr. Ashutosh Raghuvanshi Viren Shetty Partner Managing Director Whole -time Director DIN: 02775637 DIN: 02144586 Kesavan Venugopalan Sridhar S Chief Financial Officer Company Secretary Place: Bengaluru Place: Bengaluru Date: 29 May 2018 Date: 29 May 2018 Annual Report 2017-18 171 Company Overview Statutory Reports Financial Statements Consolidated Statement of Cash Flow (` in million) For the year ended For the year ended Particulars 31 March 2018 31 March 2017 Cash flow from operating activities Profit before tax 803.66 1,353.40 Adjustments : Depreciation and amortisation expense 999.50 799.21 Interest income (27.49) (53.10) Interest income from financial asset at amortised cost (15.32) - Provision for loss allowance 83.06 - Bad debts written off 30.27 - Provision of inventories for write-down to net realisable value 5.31 - Right to use the asset 16.40 - Finance costs 467.55 218.03 Share based payment expenses 42.46 59.40 Government grant income (35.28) (37.57) Assets/ Capital-work-in-progress written off - 27.48 Loss on sale of fixed assets 14.83 14.10 Profit on sale of investment (3.10) (5.11) Exceptional items (5.41) 13.40 Unrealised foreign exchange loss, net 3.75 6.55 Share of loss of equity accounted investees 46.35 79.34 Operating cash flow before working capital changes 2,426.55 2,475.13 Changes in trade receivables (760.41) (55.82) Changes in inventories (106.09) (38.22) Changes in loans, other financial assets and other assets (121.24) (109.94) Changes in trade payables and other financial liabilities 605.75 260.97 Changes in provision 116.58 27.26 Cash generated from operations 2,161.14 2,559.38 Income tax paid (net of refund) (338.53) (365.85) Net cash generated from operating activities (A) 1,822.61 2,193.53 Cash flow from investing activities Acquisition of property, plant and equipment (including capital work-in-progress) (2,037.33) (1,350.43) Proceeds from sale of property, plant and equipment 11.39 8.58 Proceeds from slump sale - 155.70 Proceeds from disposal of subsidiary (net of cash as on the date of sale ) - 2.54 Purchase of mutual fund (2,465.00) (2,730.00) Proceeds from sale of mutual fund 2,668.10 2,535.11 Payment towards acquisition of business (1,924.49) - Investment in equity shares of an associate (8.58) - Share application money paid during the year - (98.76) Proceeds from refund of share application money - 1.81 Investment for acquisition of subsidary (1,613.42) (44.53) Investment in promissory note in an associate (65.04) (20.01) Investment in bank deposit (11.34) 295.18 Repayment of bank deposit 63.36 (271.45) Interest received 44.72 53.64 Net cash (used) in investing activities (B) (5,337.65) (1,462.62) 172 Narayana Hrudayalaya Limited Consolidated Statement of Cash Flow (Contd.) (` in million) For the year ended For the year ended Particulars 31 March 2018 31 March 2017 Cash flow from financing activities Proceeds from long-term borrowings 3,835.56 568.23 Proceeds from commercial papers 500.00 - Repayment of long-term borrowings (369.69) (614.02) Repayment of commercial papers (500.00) (200.00) Proceeds from exercise of share options 0.54 0.32 Interest and other borrowing costs (315.70) (205.91) Net cash (used in) / generated from financing activities (C) 3,150.71 (451.38) Net increase / (decrease) in cash and cash equivalents (A+B+C) (364.32) 279.53 Cash and cash equivalents at the beginning of the year (refer note 13)* 172.21 (108.06) Effects of exchange gain on restatement of foreign currency cash and cash equivalents 3.00 0.74 Add: Cash and cash equivalents at the beginning of the year pertaining to entities acquired 139.10 - during the year Cash and cash equivalents at the end of the year (refer note 13) (50.01) 172.21 *Cash and cash equivalents includes bank overdrafts that are repayable on demand and form an integral part of the Company’s cash management. The notes referred to above form an integral part of the financial statements As per our report of even date attached for Deloitte Haskins & Sells LLP for and on behalf of the Board of Directors of Chartered Accountants Narayana Hrudayalaya Limited V.Balaji Dr. Ashutosh Raghuvanshi Viren Shetty Partner Managing Director Whole -time Director DIN: 02775637 DIN: 02144586 Kesavan Venugopalan Sridhar S Chief Financial Officer Company Secretary Place: Bengaluru Place: Bengaluru Date: 29 May 2018 Date: 29 May 2018 Annual Report 2017-18 173 Company Overview Statutory Reports Financial Statements - 0.33 0.34 34.79 59.40 514.02 829.73 (19.17) 548.81 830.07 equity 7,589.57 6,718.94 Total other Total ( ` in million) ------0.45 2.36 2.73 (0.03) (0.79) (0.82) Non- interest controlling 0.33 0.37 34.79 59.40 (0.45) 514.02 830.52 (19.17) 548.81 830.89 Total 7,587.21 6,716.21 ------(12.52) (12.52) hedge reserve - - Effective cash flow portion of ------2.04 0.37 2.04 0.37 (7.60) (7.97) Amount 2,043.61 2,043.61 2,043.61 benefit plans Items of OCI of net defined Remeasurement ------45.27 45.27 83.40 (19.17) 102.57 reserve Foreign Foreign currency translation - - - - - ( ` in million, except no. of shares) 204,360,804 204,360,804 (0.45) 204,360,804 514.02 830.52 514.02 830.52 No. of Shares 2,285.28 1,455.21 earnings Retained ------250.00 250.00 reserve General ------59.40 93.42 34.02 Share options outstanding ------0.33 (20.07) (20.40) shares Treasury Treasury Reserves and Surplus ------4,901.24 4,901.24 reserve premium Securities ------1.54 1.54 Capital reserve ` 10 each issued, subscribed and fully paid up Other equity Equity share capital Total comprehensive income for the Total year Other comprehensive income, net of tax Balance as at 31 March 2017 Profit for the year Others Deletion during the year Share-based payments Balance as at 31 March 2018 Balance as at 31 March 2017 Changes in equity share capital during 2017-18 (refer note 14 (a)) Total comprehensive income for the Total year recorded directly in Transactions equity Exercise of share options Particulars Equity shares of Balance as at 1 April 2016 Changes in equity share capital during 2016-17 (refer note 14 (a)) Profit for the year Particulars Other comprehensive income, net of tax Balance as at 1 April, 2016 (b) Consolidated Statement of Changes in Equity (a) 174 Narayana Hrudayalaya Limited 0.54 42.46 (0.00) (6.99) 142.38 equity 8,316.77 Total other Total ( ` in million) - - - - 0.55 2.91 Non- interest controlling 0.54 42.46 (0.55) (6.99) 142.38 Total 8,313.86 - - - - - (12.52) hedge reserve Effective cash flow portion of - - - - (0.00) (5.56) Viren Shetty Viren Whole -time Director 02144586 DIN: Sridhar S Company Secretary benefit plans Items of OCI of net defined Remeasurement - - - - - 128.67 reserve Foreign Foreign currency translation - - - (0.55) (6.99) 2,791.76 earnings Retained - - - - - 250.00 reserve General - - - - 42.46 Managing Director 02775637 DIN: Venugopalan Kesavan Chief Financial Officer Place: Bengaluru Date: 29 May 2018 for and on behalf of the Board Directors Narayana Hrudayalaya Limited Ashutosh Raghuvanshi Dr. 135.88 Share options outstanding - - - - 0.54 (19.53) shares Treasury Treasury Reserves and Surplus - - - - - 4,901.24 reserve premium Securities - - - - 142.38 143.92 Capital reserve Partner Place: Bengaluru Date: 29 May 2018 As per our report of even date attached for Deloitte Haskins & Sells LLP Chartered Accountants V.Balaji Balance as at 31 March 2018 Other Capital reserve for bargain purchase business combination Effect of winding up subsidiary Share-based payments Particulars Exercise of share options Consolidated Statement of Changes in Equity (Contd.) The notes referred to above form an integral part of the consolidated financial statements Annual Report 2017-18 175 Company Overview Statutory Reports Financial Statements Notes to the consolidated financial statements for the year ended 31 March 2018 1. Group overview Details of the Group’s accounting policies are included in Narayana Hrudayalaya Limited (‘the Company’ or Note 3. ‘the Holding company’) together with its subsidiaries and associates (collectively referred to as ‘Narayana 2.2. Functional and presentation currency Hrudayalaya Group’ or ‘the Group’) is primarily engaged These consolidated financial statements are presented in in business of rendering medical and healthcare services. Indian Rupees (`), which is also the Company’s functional Narayana Hrudayalaya Limited, the flagship company of currency. All amounts are presented in ` in million, except the Group, was incorporated on 19 July 2000 under the share data and per share data, unless otherwise stated. Companies Act, 1956 with its registered office in Bengaluru. The Group was rebranded as ‘Narayana Health’ in 2013. 2.3. Basis of measurement It has a network of multispeciality and super speciality The consolidated financial statements have been prepared hospitals spread across multiple locations. The Group on the historical cost basis except for the following items: owns and operates certain hospitals and also enters into management agreements with hospitals under which the Items Measurement basis Group acquires the operating control of the hospitals. Certain financial Fair value assets and liabilities During the year ended 31 March 2016, the Company (including derivative completed the Initial Public Offering (IPO) through an instruments) offer for sale by the existing shareholders to the extent Net defined benefit Fair value of plan assets less present of 24,523,297 equity shares of face value of ` 10 each (asset)/ liability value of defined benefit obligations for a cash price of ` 250 per equity share including a premium of ` 240 per equity share, of 6,287,978 equity 2.4. Use of estimates and judgements shares by Ashoka Investment Holdings Limited, 1,886,455 In preparing these consolidated financial statements, equity shares by Ambadevi Mauritius Holdings Limited, management has made judgements, estimates and 12,261,648 equity shares by JP Morgan Mauritius Holdings assumptions that affect the application of accounting IV Limited, 2,043,608 equity shares by Dr. Devi Prasad policies and the reported amounts of assets, liabilities, Shetty and 2,043,608 equity shares by Shakuntala Shetty income and expenses. Actual results may differ from these aggregating to ` 6130.82 million and the equity shares of estimates. the Company were listed on the Bombay Stock Exchange Estimates and underlying assumptions are reviewed on Limited and the National Stock Exchange of India Limited an ongoing basis. Revisions to accounting estimates are on 6 January 2016. recognized prospectively. 2. Basis of preparation of the consolidated financial Judgments statements Information about judgements made in applying 2.1. Statement of compliance accounting policies that have the most significant effects The consolidated financial statements have been prepared on the amounts recognised in the consolidated financial in accordance with Indian Accounting Standards (Ind AS) statements is included in the following notes: as per the Companies (Indian Accounting Standards) Rules 2015 notified under Section 133 of Companies Act Note 29 – Assessment of contingent liabilities and 2013 (the ‘Act’) and other relevant provisions of the Act. commitments Note 30 – leases and lease classification; The consolidated financial statements for the year ended Note 34 – consolidation: whether the Group has control 31 March 2017, were audited by BSR & Co. LLP (Firm’s over an investee; registration number: 101248W/W-100022) the predecessor auditor. Note 50 – Provision for taxes; Note 51 – financial instruments and The consolidated financial statements were authorized Note 42 – share based payments for issue by the Company’s Board of Directors on 29 May 2018. 176 Narayana Hrudayalaya Limited Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) Assumptions and estimation uncertainties 3. Significant accounting polices Information about assumptions and estimation 3.1. Basis of consolidation uncertainties that have a significant risk of resulting in a a. Subsidiaries material adjustment in the year ending 31 March 2018 is Subsidiaries are entities controlled by the Group. The included in the following notes: Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the Note 50 – recognition of deferred tax assets entity and has the ability to affect those returns through Note 37 – measurement of defined benefit obligations: key its power over the entity. The financial statements actuarial assumptions; of subsidiaries are included in the consolidated Note 29 – recognition and measurement of contingencies; financial statements from the date on which control key assumptions about the likelihood and magnitude of an commences until the date on which control ceases. outflow of resources; b. Non-controlling interests (NCI) Note 5-8, 12, 13 and 51 – recognition of impairment of NCI are measured at their proportionate share of financial assets and the acquiree’s net identifiable assets at the date of Note 4 - useful life of property, plant and equipment and acquisition. intangible assets 2.5. Measurement of fair values Changes in the Group’s equity interest in a subsidiary that do not result in a loss of control are accounted for A number of the Group’s accounting policies and as equity transactions. disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. c. Loss of control Fair values are categorised into different levels in a fair When the Group loses control over a subsidiary, value hierarchy based on the inputs used in the valuation it derecognises the assets and liabilities of the techniques as follows: subsidiary, and any related NCI and other components of equity. Any interest retained in the former subsidiary Level 1: quoted prices (unadjusted) in active markets for is measured at fair value at the date the control is identical assets or liabilities. lost. Any resulting gain or loss is recognised in the Level 2: inputs other than quoted prices included in Level statement of profit or loss. 1 that are observable for the asset or liability, either directly d. Equity accounted investees (i.e. as prices) or indirectly (i.e. derived from prices). The Group’s interests in equity accounted investees Level 3: inputs for the asset or liability that are not based on comprise interests in associates. observable market data (unobservable inputs). An associate is an entity in which the Group has When measuring the fair value of an asset or a liability, the significant influence, but not control or joint control, Group uses observable market data as far as possible. If over the financial and operating policies. the inputs used to measure the fair value of an asset or a Interests in associates are accounted for using the liability fall into different levels of the fair value hierarchy, equity method. They are initially recognised at cost then the fair value measurement is categorised in its entirety which includes transaction costs. Subsequent to initial in the same level of the fair value hierarchy as the lowest recognition, the consolidated financial statements level input that is significant to the entire measurement. include the Group’s share of profit or loss and Other The Group recognises transfers between levels of the fair Comprehensive Income (OCI) of equity- accounted value hierarchy at the end of the reporting period during investees until the date on which significant influence ceases. which the change has occurred. Further information about the assumptions made in measuring fair values is included e. Transactions eliminated on consolidation in the following notes: Intra-group balances and transactions, and any Note 51 – financial instruments unrealised income and expenses arising from intra- Note 42 – share-based payments group transactions, are eliminated. Unrealised gains Annual Report 2017-18 177 Company Overview Statutory Reports Financial Statements Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) arising from transactions with equity accounted reduces an accounting mismatch that would otherwise investees are eliminated against the investment to arise. the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as Financial assets: Business model assessment unrealised gains, but only to the extent that there is no The Group makes an assessment of the objective of evidence of impairment. the business model in which a financial asset is held at a portfolio level because this best reflects the way the 3.2. Financial instruments business is managed and information is provided to a. Recognition and initial measurement management. The information considered includes: Trade receivables and debt securities issued are − the stated policies and objectives for the portfolio initially recognised when they are originated. All other and the operation of those policies in practice. These financial assets and financial liabilities are initially include whether management’s strategy focuses on recognised when the Group becomes a party to the earning contractual interest income, maintaining a contractual provisions of the instrument. particular interest rate profile, matching the duration A financial asset or financial liability is initially of the financial assets to the duration of any related measured at fair value plus, for an item not at fair value liabilities or expected cash outflows or realising cash through profit and loss (FVTPL), transaction costs that flows through the sale of the assets; are directly attributable to its acquisition or issue. – how the performance of the portfolio is evaluated and reported to the Group’s management; b. Classification and subsequent measurement – the risks that affect the performance of the business Financial assets model (and the financial assets held within that On initial recognition, a financial asset is classified as business model) and how those risks are managed; measured at – how managers of the business are compensated – - amortised cost; or e.g. whether compensation is based on the fair value - FVTPL of the assets managed or the contractual cash flows collected; and Financial assets are not reclassified subsequent to their initial recognition, except if and in the period – the frequency, volume and timing of sales of financial the Group changes its business model for managing assets in prior periods, the reasons for such sales and financial assets. expectations about future sales activity. A financial asset is measured at amortised cost if Transfers of financial assets to third parties in transactions it meets both of the following conditions and is not that do not qualify for derecognition are not considered designated as at FVTPL: sales for this purpose, consistent with the Group’s continuing recognition of the assets. − the asset is held within a business model whose objective is to hold assets to collect contractual Financial assets that are held for trading or are managed cash flows; and and whose performance is evaluated on a fair value basis are measured at FVTPL. − the contractual terms of the financial asset give rise on specified dates to cash flows that are Financial assets: Assessment whether contractual solely payments of principal and interest on the cash flows are solely payments of principal and interest principal amount outstanding. For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition. All financial assets not classified as measured at ‘Interest’ is defined as consideration for the time value of amortised cost as described above are measured money and for the credit risk associated with the principal at FVTPL. On initial recognition, the Group may amount outstanding during a particular period of time and irrevocably designate a financial asset that otherwise for other basic lending risks and costs (e.g. liquidity risk meets the requirements to be measured at amortised and administrative costs), as well as a profit margin. cost or at FVTPL if doing so eliminates or significantly 178 Narayana Hrudayalaya Limited Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) In assessing whether the contractual cash flows are solely Financial liabilities: Classification, subsequent payments of principal and interest, the Group considers the measurement and gains and losses contractual terms of the instrument. This includes assessing Financial liabilities are measured at amortised cost using whether the financial asset contains a contractual term that effective interest method. For trade and other payable could change the timing or amount of contractual cash maturing within one year from the balance sheet date, the carrying value approximates fair value due to short maturity. flows such that it would not meet this condition. In making this assessment, the Group considers: Derivative financial instruments − contingent events that would change the amount or timing of cash flows; Hedge accounting The Group uses derivative financial instruments to manage − terms that may adjust the contractual coupon rate, risks associated with interest rate fluctuations relating to including variable interest rate features; foreign currency loan taken by the group. − prepayment and extension features; and Cash flow hedge: − terms that limit the Group’s claim to cash flows from The Group has designated derivative financial instruments specified assets (e.g. non‑ recourse features). taken for interest rate as ‘cash flow’ hedges relating to A prepayment feature is consistent with the solely payments foreign currency loan taken by the group. of principal and interest criterion if the prepayment amount The use of derivative financial instruments is governed by substantially represents unpaid amounts of principal and the Group’s policies approved by the Board of Directors, interest on the principal amount outstanding, which may which provide written principles on the use of such include reasonable additional compensation for early instruments consistent with the Group’s risk management termination of the contract. Additionally, for a financial strategy. asset acquired at a significant discount or premium to its contractual par amount, a feature that permits or requires The effective portion of changes in the fair value of prepayment at an amount that substantially represents derivatives that are designated and qualify as cashflow the contractual par amount plus accrued (but unpaid) hedges is recognised in other comprehensive income contractual interest (which may also include reasonable and accumulated under the heading of cash flow hedging additional compensation for early termination) is treated reserve. The gain or loss relating to the ineffective portion is as consistent with this criterion if the fair value of the recognised immediately in statement of profit or loss. prepayment feature is insignificant at initial recognition. Hedge accounting is discontinued when the hedging Financial assets: Subsequent measurement and instrument expires or is sold, terminated, or exercised, or gains and losses when it no longer qualifies for hedge accounting. Any gain or loss recognised in other comprehensive income and Financial These assets are subsequently accumulated in equity at that time remains in equity and assets at measured at fair value. Net gains and is recognized when the forecast transaction is ultimately FVTPL losses, including any interest or dividend recognised in profit or loss. When a forecast transaction is income, are recognised in profit or loss. no longer expected to occur, the gain or loss accumulated Financial These assets are subsequently in equity is recognised immediately in the statement of assets at measured at amortised cost using the profit and loss. amortised cost effective interest method. The amortised cost is reduced by impairment losses. Others: Interest income, foreign exchange Changes in fair value of foreign currency derivative gains and losses and impairment are instruments not designated as cash flow hedges and the recognised in profit or loss. Any gain or ineffective portion of cash flow hedges are recognized in loss on derecognition is recognised in the statement of profit and loss and reported within foreign profit or loss. exchange gains/ (losses). Annual Report 2017-18 179 Company Overview Statutory Reports Financial Statements Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) c. Derecognition the inventories to their present location after adjusting for value added tax wherever applicable, applying the first in Financial assets first out method. The Group derecognises a financial asset when the contractual rights to the cash flows from the financial 3.4. Cash and cash equivalents asset expire, or it transfers the rights to receive the Cash and cash equivalents comprise cash at bank and on contractual cash flows in a transaction in which hand and short-term deposits with an original maturity of substantially all of the risks and rewards of ownership three months or less which are subject to insignificant risk of the financial asset are transferred or in which the of changes in value. group neither transfers nor retains substantially all of the risks and rewards of ownership and does not 3.5. Treasury Shares retain control of the financial asset. The Company has created an Employee Benefit Trust (EBT) for providing share based payment to its employees. The If the Group enters into transactions whereby it Company treats EBT as its extension and shares held by transfers assets recognised on its balance sheet, but EBT are treated as treasury shares. retains either all or substantially all of the risks and rewards of the transferred assets, the transferred Own equity instruments that are acquired (treasury shares) assets are not derecognised. are recognised at cost and deducted from equity. When the treasury shares are issued to the employees by EBT, the Financial liabilities amount received is recognised as an increase in equity and the resultant gain / (loss) is transferred to / from securities The Group derecognises a financial liability when its premium. contractual obligations are discharged or cancelled, or expire. 3.6. Cash flow statement The Group also derecognises a financial liability when Cash flows are reported using the indirect method, whereby its terms are modified and the cash flows under the net profit before tax is adjusted for the effects of transactions modified terms are substantially different. In this case, of a non-cash nature and any deferrals or accruals of past a new financial liability based on the modified terms is or future cash receipts or payments. The cash flows from recognised at fair value. The difference between the operating, investing and financing activities of the Group carrying amount of the financial liability extinguished are segregated. Bank overdrafts are classified as part of and the new financial liability with modified terms is cash and cash equivalents, as they form an integral part of recognised in profit or loss. an entity’s cash management. d. Offsetting 3.7. Revenue recognition Revenue from operations Financial assets and financial liabilities are offset and Revenue from medical and healthcare services to patients the net amount presented in the balance sheet when, is recognised as revenue when the related services are and only when, the Group has a legally enforceable rendered unless significant future uncertainties exist. right to set off the amounts and it intends either to Revenue is also recognised in relation to the services settle them on a net basis or to realise the asset and rendered to the patients who are undergoing treatment/ settle the liability simultaneously. observation on the balance sheet date to the extent of services rendered. 3.3. Inventories The inventories of medical consumables, drugs and Revenue is recognised net of discounts given to the surgical equipments are valued at lower of cost or net patients. realisable value. In the absence of any further estimated costs of completion and estimated costs necessary to Revenue from sale of medical consumables and drugs make the sale, the net realisable value is the selling price. within the hospital premises is recognised when property The comparison of cost and net realisible is made on an in the goods or all significant risks and rewards of item by item basis. Cost of these inventories comprises of their ownership are transferred to the customer and no all costs of purchase and other costs incurred in bringing significant uncertainty exists regarding the amount of the 180 Narayana Hrudayalaya Limited Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) consideration that will be derived from the sale of the goods depreciation and impairment losses, if any. The cost of and regarding its collection. an item of Property, Plant and Equipment comprises its purchase price, including import duties and other non- The Group has entered into management agreements refundable taxes or levies, freight, any directly attributable with certain trusts, under which, the Group has a right cost of bringing the asset to its working condition for its over the management, operation and utilisation of hospital intended use and estimated cost of dismantling and facilities owned by the trusts. As a consideration towards restoring onsite; any trade discounts and rebates are the aforesaid arrangement, the Group is obligated to offer deducted in arriving at the purchase price. Subsequent discounts to patients nominated by the trusts at free of expenditures related to an item of tangible fixed asset are cost/ concession as per the terms of the agreement. The added to its book value only if they increase the future discounts thus offered have been recognised as revenue benefits from the existing asset beyond its previously with a corresponding charge to rent expense. assessed standard of performance. Cost includes expenditures directly attributable to the acquisition of the ‘Unbilled revenue’ represents value to the extent of medical asset. and healthcare services rendered to the patients who are undergoing treatment/ observation on the balance Depreciation and amortisation sheet date and is not billed as at the balance sheet The Group depreciates property, plant and equipment date. ’Unearned revenue’ comprises billings in excess of over the estimated useful life on a straight-line basis from earnings. the date the assets are ready for intended use. Assets acquired under finance lease and leasehold improvements Income from patient’s amenities is recognized on accrual are amortized over the lower of estimated useful life and basis as and when services are rendered. lease term. Freehold land is not depreciated. The estimated useful lives of assets for the current and comparative period Interest of significant items of property, plant and equipment are as For all debt instruments measured at amortised cost, interest income is recorded using the effective interest rate follows: (EIR). EIR is the rate that exactly discounts the estimated Block of assets Useful life future cash payments or receipts over the expected life of the financial instrument or a shorter period, where Building 60 years appropriate, to the gross carrying amount of the financial Electrical installation 10 years asset or to the amortised cost of a financial liability. When Medical equipment 13 years calculating the effective interest rate, the group estimates Office equipment 5 years the expected cash flows by considering all the contractual Other equipment including air conditioners 15 years terms of the financial instrument (for example, prepayment, Furniture and fixtures 10 years extension, call and similar options) but does not consider Computers 3 years the expected credit losses. Interest income is included in Vehicles 5 years finance income in the statement of profit and loss. Depreciation methods, useful lives and residual values Dividend are reviewed at each financial year-end and adjusted Dividend income is recognised when the Group’s right to appropriately. receive dividend is established. The Group believes that the useful life as given above best represent the useful lives of the assets based on the Other Healthcare Services internal technical assessment and these useful life are as Revenue is recognized on pro-rata basis on the completion prescribed under Part C of Schedule II of the Companies of such services over the duration of the program. Act, 2013 except vehicles where useful life considered by management is lower. 3.8. Property, Plant and Equipment Recognition and measurement The cost and related accumulated depreciation are Property, plant and equipment are measured at cost which eliminated from the consolidated financial statements upon includes capitalized borrowing costs, less accumulated sale or disposition of the asset and the resultant gains or Annual Report 2017-18 181 Company Overview Statutory Reports Financial Statements Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) losses are recognized in the consolidated statement of In case of a bargain purchase, before recognising a gain in profit and loss. respect thereof, the Group determines whether there exists clear evidence of the underlying reasons for classifying the Amounts paid towards the acquisition of property, plant business combination as a bargain purchase. Thereafter, and equipment outstanding as of each reporting date are the Group reassesses whether it has correctly identified recognized as capital advance and the cost of property, all of the assets acquired and all of the liabilities assumed plant and equipment not ready for intended use before and recognises any additional assets or liabilities that are such date are disclosed under capital work- in-progress. identified in that reassessment. The Group then reviews 3.9. Business combination, goodwill and other the procedures used to measure the amounts that Ind intangible assets AS requires for the purposes of calculating the bargain purchase. If the gain remains after this reassessment and Business combination review, the Group recognises it in other comprehensive Business combinations are accounted for using the income and accumulates the same in equity as capital purchase (acquisition) method. The cost of an acquisition reserve. This gain is attributed to the acquirer. If there is measured as the fair value of the assets given, equity does not exist clear evidence of the underlying reasons instruments issued and liabilities incurred or assumed at for classifying the business combination as a bargain the date of exchange. The cost of acquisition also includes purchase, the Group recognises the gain, after reassessing the fair value of any contingent consideration. Identifiable and reviewing (as described above), directly in equity as assets acquired and liabilities and contingent liabilities capital reserve. assumed in a business combination are measured initially at their fair value on the date of acquisition. 3.10. Government grants Transaction costs incurred in connection with a business Government grants including non-monetary grants are combination are expensed as incurred. recognized where there is reasonable assurance that the grant will be received and all attached conditions will be Intangible assets complied with. Intangible assets are stated at cost less accumulated amortization and impairment. Intangible assets are Government grants are recognised in the statement of amortized over their respective estimated useful lives on a profit and loss on a systematic basis over the periods in straight-line basis, from the date that they are available for which the related costs, for which the grants are intended use. to compensate, are recognized as expenses. The estimated useful lives of intangibles are as follows: Block of assets Useful life Government grants related to assets are presented at fair value by setting up the grant as a deferred income. Computer software 3 years Third party contracts and Electronic 5 years 3.11. Employee benefits medical records Customer relationship 10 years Short term employee benefits Employee benefits payable wholly within twelve months of Amortisation method receiving services are classified as short-term employee The estimated useful life of an identifiable intangible asset benefits. These benefits include salary and wages, bonus is based on a number of factors including the effects of and ex-gratia. The undiscounted amount of short-term obsolescence, demand, competition and other economic employee benefits to be paid in exchange for employee factors (such as the stability of the industry and known services is recognized as an expense as the related service technological advances) and the level of maintenance is rendered by the employees. expenditures required to obtain the expected future cash flows from the asset. Post-employment benefits Goodwill Defined contribution plans Goodwill is measured as the excess of the sum of the A defined contribution plan is a post-employment benefit consideration transferred, over the net of the acquisition- plan under which an entity pays specified contributions to date amounts of the identifiable assets acquired and the separate entity and has no obligation to pay any further liabilities assumed. amounts. The Group makes specified obligations towards 182 Narayana Hrudayalaya Limited Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) employee provident fund and employee state insurance obligation for such compensated absences in the period to Government administered provident fund scheme and in which the employee renders the services that increase ESI scheme which is a defined contribution plan. The this entitlement. The obligation is measured on the basis Group’s contributions are recognized as an expense in the of independent actuarial valuation using the projected unit consolidated statement of profit and loss during the period credit method. in which the employee renders the related service. Employee Stock Option Plan (ESOP) Defined benefit plans The grant date fair value of equity settled share-based The Group’s gratuity benefit scheme is a defined benefit payment awards granted to employees is recognised as plan. The Group’s net obligation in respect of a defined an employee expense, with a corresponding increase in benefit plan is calculated by estimating the amount of equity, over the period that the employees unconditionally future benefit that employees have earned and returned become entitled to the awards. The amount recognised as for services in the current and prior periods; that benefit is expense is based on the estimate of the number of awards discounted to determine its present value. The calculation for which the related service are expected to be met, such of Group’s obligation under the plan is performed that the amount ultimately recognised as an expense is periodically by a qualified actuary using the projected unit based on the number of awards that do meet the related credit method. service conditions at the vesting date. The gratuity scheme is managed by third party administrator. 3.12. Borrowing cost Borrowing costs are interest and other costs (including Remeasurements of the net defined benefit liability, which exchange differences relating to foreign currency comprise actuarial gains and losses, the return on plan borrowings to the extent that they are regarded as an assets (excluding interest) and the effect of the asset ceiling adjustment to interest costs) incurred in connection (if any, excluding interest), are recognised immediately in with the borrowing of funds. Borrowing costs directly other comprehensive income (OCI). The Group determines attributable to acquisition or construction of an asset which the net interest expense (income) on the net defined liability necessarily take a substantial period of time to get ready (assets) for the period by applying the discount rate used for their intended use are capitalised as part of the cost to measure the net defined obligation at the beginning of of that asset. Other borrowing costs are recognised as an the annual period to the then net defined benefit liability expense in the period in which they are incurred. (asset), taking into account any changes as a result of contribution and benefit payments. Net interest expense 3.13. Leases and other expenses related to defined benefit plans are Leases under which the Group assumes substantially recognised in the consolidated statement of profit and all the risks and rewards of ownership are classified as loss. The Company recognizes gains and losses in the finance leases. Such assets are capitalised at fair value of curtailment or settlement of a defined benefit plan when the the asset or present value of the minimum lease payments curtailment or settlement occurs. at the inception of the lease, whichever is lower. Assets held under leases that do not transfer substantially all the When the benefits of a plan are changed or when a plan risks and reward of ownership are not recognized in the is curtailed, the resulting change in benefit that relates to consolidated balance sheet. past service or the gain or loss on curtailment is recognised immediately in the consolidated statement of profit and Lease payments under operating lease are generally loss. recognised as an expense in the statement of profit and loss on a straight line basis over the term of lease unless Compensated absences such payments are structured to increase in line with the The employees can carry-forward a portion of the expected general inflation to compensate for the lessor’s unutilized accrued compensated absences and utilize it expected inflationary cost increases. in future service periods or receive cash compensation on termination of employment. Since the employee has The Group has entered into management agreements unconditional right to avail the leave, the benefit is classified with certain trusts, under which, the Group has a right as a short term employee benefit. The Group records an over the management, operation and utilisation of hospital Annual Report 2017-18 183 Company Overview Statutory Reports Financial Statements Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) facilities owned by the trusts. As a consideration towards Current income tax the aforesaid arrangement, the Group is obligated to offer Current tax comprises the expected tax payable or discounts to patients nominated by the trusts at free of receivable on the taxable income for the year and any cost/concession as per the terms of the agreement. The adjustment to the tax payable or receivable in respect of discounts thus offered have been recognised as revenue previous years. The amount of current tax reflects the best with a corresponding charge to rent expense. estimate of the tax amount expected to be paid or received after considering the uncertainty, if any, related to income Further, at the inception of above arrangement, the Group taxes. It is measured using tax rates (and tax laws) enacted determines whether the above arrangement is or contains a or substantially enacted by the reporting dates. lease. At inception or on reassessment of an arrangement that contains a lease, the Group separates a payments and Current tax assets and current tax liabilities are offset only if other consideration required by the arrangement into those there is a legally enforceable right to set off the recognised for the lease and those for other elements on the basis of amounts, and it is intended to realize the assets and settle their relative fair values. If the Group concludes for a finance the liability on a net basis or simultaneously. lease that it is impracticable to separate the payments reliably, then an asset and a liability are recognised at an Deferred tax amount equal to the fair value of the underlying asset; Deferred tax is recognized in respect of temporary subsequently, the liability is reduced as payments are made differences between carrying amounts of assets and and an imputed finance cost on the liability is recognised liabilities for financial reporting purposes and the using the Group’s incremental borrowing rate. corresponding amounts used for taxation purposes. Minimum lease payments made under finance leases are Deferred tax liabilities are recognized for all taxable apportioned between the finance charge and the reduction temporary differences. of the outstanding liability. The finance charge is allocated The carrying amount of deferred tax assets is reviewed at to each period during the lease term so as to produce a each reporting date and reduced to the extent that it is no constant periodic rate of interest on the remaining balance longer probable that sufficient taxable profit will be available of the liability. to allow all or part of the deferred tax asset to be utilized. 3.14. Earnings per share Deferred tax assets and liabilities are measured at the tax The basic earnings per share is computed by dividing the rates that are expected to apply in the period when the consolidated net profit attributable to equity shareholders asset is realized or the liability is settled, based on tax rates for the period by the weighted average number of equity (and tax laws) that have been enacted or substantively shares outstanding during the year. enacted at the reporting date. Diluted earnings per share is computed by dividing the The measurement of deferred tax reflects the tax net profit attributable to equity shareholders for the year consequences that would follow from the manner in which relating to the dilutive potential equity shares, by the the Company expects, at the reporting date, to recover or weighted average number of equity shares considered settle the carrying amount of its assets and liabilities. for deriving basic earnings per share and the weighted average number of equity shares which could have been Deferred tax assets and liabilities are offset if there is a issued on the conversion of all dilutive potential equity legally enforceable right to offset current tax liabilities and shares. Potential equity shares are deemed to be dilutive assets, and they relate to income taxes levied by the same only if their conversion to equity shares would decrease the tax authority on the same taxable entity, or on different tax net profit per share. entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will 3.15. Income tax be realised simultaneously. The Income-tax expense comprises current tax and deferred tax. It is recognised in profit and loss except to the Minimum Alternative tax extent that is relates to an item recognised directly in equity According to Section 115JAA of the Income tax Act, 1961, or in other comprehensive income. Minimum Alternative Tax (MAT’) paid over and above the 184 Narayana Hrudayalaya Limited Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) normal income tax in a subject year is eligible for carry 3.17. Impairment forward for fifteen succeeding assessment years for set-off a. Impairment of financial instruments against normal income tax liability. The MAT credit asset is The Group recognises loss allowances for expected assessed against the entity’s normal income tax during the credit losses on: specified period. - financial assets measured at amortised cost; 3.16. Foreign exchange transactions and translations Transactions in foreign currency are translated into the At each reporting date, the Group assesses whether respective functional currencies using the exchange rates financial assets carried at amortised cost are credit‑ prevailing at the dates of the respective transactions. impaired. A financial asset is ‘credit‑ impaired’ when one or more events that have a detrimental impact on Foreign exchange gains and losses resulting from the the estimated future cash flows of the financial asset settlement of such transactions and from the translation have occurred. at the exchange rates prevailing at the reporting date of monetary assets and liabilities denominated in foreign Evidence that a financial asset is credit‑ impaired currencies are recognised in the Consolidated Statement includes the following observable data: of Profit and loss and reported within foreign exchange gains/ (losses). - significant financial difficulty of the borrower or issuer; Non monetary assets and liabilities denominated in a foreign - the restructuring of a loan or advance by the Group on currency and measured at historical cost are translated at terms that the Group would not consider otherwise; the exchange rate prevalent at the date of transaction. - it is probable that the borrower will enter bankruptcy or For the purposes of presenting the consolidated financial other financial reorganisation; or statements, assets and liabilities of Group’s foreign operations with functional currency different from the - the disappearance of an active market for a security Company are translated into Company’s functional because of financial difficulties. currency i.e. INR using exchange rates prevailing at the end of each reporting period. Income and expense items The Group measures loss allowances at an amount are translated at the average exchange rates for the period, equal to lifetime expected credit losses, except for the unless exchange rates fluctuate significantly during that following, which are measured as 12 month expected period, in which case the exchange rates at the dates of credit losses: the transactions are used. Exchange differences arising, if any are recognised in other comprehensive income and - debt securities that are determined to have low credit accumulated in equity. risk at the reporting date; and On the disposal of foreign operation, all of the exchange - other debt securities and bank balances for which differences accumulated in equity in respect of that credit risk (i.e. the risk of default occurring over the operation attributable to the owners of the Company are expected life of the financial instrument) has not reclassified to the Consolidated Statement of Profit and increased significantly since initial recognition. Loss. Loss allowances for trade receivables are always If the Group disposes off part of its interest in a subsidiary measured at an amount equal to lifetime expected but retains control, then the relevant proportion of the credit losses. cumulative amount is reattributed to OCI. When the Group disposes off only part of an associate while retaining Lifetime expected credit losses are the expected credit significant influence, the relevant proportion of the losses that result from all possible default events over cumulative amount is reclassified to profit or loss. the expected life of a financial instrument. Annual Report 2017-18 185 Company Overview Statutory Reports Financial Statements Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) 12-month expected credit losses are the portion of impairment. If any such indication exists, then the expected credit losses that result from default events asset’s recoverable amount is estimated. Goodwill is that are possible within 12 months after the reporting tested annually for impairment. date (or a shorter period if the expected life of the instrument is less than 12 months). For impairment testing, assets that do not generate independent cash inflows are grouped together into In all cases, the maximum period considered when cash-generating units (CGUs). Each CGU represents estimating expected credit losses is the maximum the smallest group of assets that generates cash contractual period over which the Group is exposed inflows that are largely independent of the cash to credit risk. inflows of other assets or CGUs. When determining whether the credit risk of a Goodwill arising from a business combination is financial asset has increased significantly since allocated to CGUs or groups of CGUs that are initial recognition and when estimating expected expected to benefit from the synergies of the credit losses, the Group considers reasonable and supportable information that is relevant and available combination. without undue cost or effort. This includes both quantitative and qualitative information and analysis, The recoverable amount of a CGU (or an individual based on the Group’s historical experience and asset) is the higher of its value in use and its fair informed credit assessment and including forward‑ value less costs to sell. Value in use is based on looking information. the estimated future cash flows, discounted to their present value using a pre-tax discount rate that Measurement of expected credit losses reflects current market assessments of the time value Expected credit losses are a probability‑weighted estimate of money and the risks specific to the CGU (or the of credit losses. Credit losses are measured as the present asset). value of all cash shortfalls (i.e. the difference between the cash flows due to the Group in accordance with the contract The Group’s corporate assets do not generate and the cash flows that the Group expects to receive). independent cash inflows. To determine impairment of a corporate asset, recoverable amount is determined Presentation of allowance for expected credit losses for the CGUs to which the corporate asset belongs. in the balance sheet Loss allowances for financial assets measured at amortised An impairment loss is recognised if the carrying amount cost are deducted from the gross carrying amount of the of an asset or CGU exceeds its estimated recoverable assets. amount. Impairment losses are recognised in the statement of profit and loss. Write-off The gross carrying amount of a financial asset is written 3.18. Segment Reporting off (either partially or in full) to the extent that there is no Operating results are regularly reviewed by the Chief realistic prospect of recovery. This is generally the case Operating Decision Maker (‘CODM’) who makes decisions when the Group determines that the trade receivables does about resources to be allocated to the segment and assess not have assets or sources of income that could generate its performance. Segment results that are reported to the sufficient cash flows to repay the amounts subject to the CODM include items directly attributable to a segment as write‑ off. However, financial assets that are written off could well as those that can be allocated on a reasonable basis. still be subject to enforcement activities in order to comply with the Group’s procedures for recovery of amounts due. 3.19. Non-current assets or disposal group held for sale Non-current assets or disposal groups comprising assets b. Impairment of non-financial assets and liabilities are classified as held for sale if it is highly The Group’s non-financial assets, inventories and probable that they will be recovered primarily through sale deferred tax assets, are reviewed at each reporting rather than through continuing use. date to determine whether there is any indication of 186 Narayana Hrudayalaya Limited Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) Such assets or disposal groups are generally measured at lower of the expected net cost of fulfilling the contract and the lower of their carrying amount and fair value less costs the expected cost of terminating the contract. to sell. Losses on initial classification of assets held for sale and subsequent gain and losses on remeasurement are 3.21. Share and debenture issue expenses recognized in the consolidated statement of profit and loss. Share and debenture issue expenses are adjusted against the securities premium account as permissible under Once classified as held-for-sale, intangible assets, Section 52 of the Companies Act, 2013, to the extent any property, plant and equipment and investment properties balance is available for utilisation in the securities premium are no longer amortised or depreciated, and any equity- account. accounted investee is no longer equity accounted. 3.22. New Standards and interpretation not yet 3.20. Provisions and contingencies adopted Provisions are recognized when the Group has a present Ind AS 115, Revenue from contracts with customers: On obligation (legal or constructive) as a result of a past event, 28 March 2018, the Ministry of Corporate Affairs (“MCA”), it is probable that an outflow of economic benefits will be notified Ind AS 115 “Revenue from Contracts with required to settle the obligation, and a reliable estimate can Customers” as part of the Companies (Indian Accounting be made of the amount of the obligation. Standards) Amendment Rules, 2018. The said standard is applicable for the accounting periods beginning on or after The amount recognized as a provision is the best estimate April 1, 2018. The Group is in the process of assessing the of the consideration required to settle the present obligation impact of the said standard on its financial statements. at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Appendix B of Ind AS 21, Foreign currency transaction and advance consideration: On 28 March 2018, MCA When some or all of the economic benefits required to has notified the Company ( Indian Accounting Standards) settle a provision are expected to be recovered from a Amendment Rules, 2018 containing Appendix B to third party, the receivable is recognized as an asset, if it is Ind AS 21, Foreign currency transaction and advance virtually certain that reimbursement will be received and the consideration which clarifies the date of the transaction for amount of the receivable can be measured reliably. the purpose of determining the exchange rate to use on initial recognition of the related assets, expense or income, Provisions for onerous contracts are recognized when when an entity has received or paid advance consideration the expected benefits to be derived by the Group from a in a foreign currency. The amendment will come into force contract are lower than the unavoidable costs of meeting from 1 April 2018. The Group is in the process of assessing the future obligations under the contract. Provisions for the impact of the said standard on its financial statements. onerous contracts are measured at the present value of Annual Report 2017-18 187 Company Overview Statutory Reports Financial Statements Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) - - - - - 2017 As at 59.95 36.45 10.85 26.92 26.92 256.62 352.30 360.27 815.01 395.42 106.72 594.13 293.58 816.04 530.36 581.47 3,123.71 1,720.57 1,267.83 31 March 10,209.45 11,348.20 ( ` in million) Net block 2018 As at 18.67 20.38 86.83 249.99 489.81 506.62 135.42 540.73 100.78 137.17 660.29 285.12 794.27 178.91 417.33 178.28 350.44 660.47 702.82 2,471.30 5,062.88 1,233.95 1,720.57 2,530.20 31 March 17,116.68 18,830.41 - - - 1.35 1.97 1.06 9.27 2018 As at 12.85 23.21 93.49 52.42 46.37 142.13 473.98 126.31 565.49 475.01 214.60 158.76 171.97 204.74 189.76 246.46 2,408.87 5,127.15 5,373.61 31 March ------0.19 0.39 0.30 0.17 0.44 24.73 26.22 26.22 Deletions - - - - 6.63 5.12 1.97 1.06 9.27 12.85 74.45 28.22 90.01 85.74 35.14 17.26 18.30 45.68 24.40 12.50 46.37 19.47 76.17 465.06 923.33 999.50 Amortisation Depreciation/ ------1.35 2017 As at 98.48 18.09 76.23 39.92 Accumulated depreciation / amortisation 1 April 399.72 135.50 475.78 389.44 179.90 140.46 126.29 180.34 170.29 170.29 1,968.54 4,230.04 4,400.33 2018 As at 41.88 21.44 963.79 506.62 392.12 261.73 230.66 315.38 832.26 337.54 999.01 180.88 463.70 276.59 187.55 350.44 660.47 949.28 2,484.15 7,471.45 1,799.44 1,015.74 1,721.92 2,689.26 31 March 22,243.83 24,204.02 ------0.39 0.40 0.65 0.39 0.44 50.17 52.44 2,170.28 2,222.72 Deletions - - (ix)) 4.04 2.63 99.47 12.94 47.71 79.38 21.44 Gross block 79.00 212.16 146.35 103.70 509.30 231.27 111.84 180.88 463.70 187.55 752.07 7,856.78 2,484.15 2,429.37 1,280.97 1,990.36 Additions 10,678.21 (refer note - - - - - 2017 As at 28.94 1 April 752.02 360.27 392.12 158.43 784.86 216.35 182.95 720.42 333.50 996.38 197.21 530.36 581.47 197.21 5,092.25 1,290.79 1,721.92 1,408.29 14,439.49 15,748.53 (i) Property, plant and equipment, capital work-in-progress and intangible assets plant and equipment, capital work-in-progress (i) Property, Particulars Building Electrical installation Medical equipment (A) Tangible assets (owned) (A) Tangible land (i) (ii) Freehold Building Office equipment Other equipment including air conditioners Furniture and fixtures Furniture Computers Vehicles assets (leased): Tangible Leasehold improvements Leasehold land (iv) Land Building (iii) Building (iii) Building (iii) Building (iii) tangible assets (A) Total (B) Capital work- in- progress (B) Capital work- (C) Goodwill Customer relationship intangible assets (D) Total Grand total (A+B+C+D) (D) Intangible assets Computer software Third party contracts Electronic medical records 4 Notes on 4 (ii) to be referred 188 Narayana Hrudayalaya Limited Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) 6.98 2016 As at 38.50 66.86 28.27 28.27 597.24 270.00 394.42 413.47 107.49 363.25 777.03 838.42 297.96 138.03 590.21 1,216.35 2,818.02 1,720.57 9,926.56 31 March 10,683.07 ( ` in million) Net block 2017 As at 36.45 26.92 59.95 10.85 26.92 594.13 256.62 352.30 395.42 106.72 360.27 815.01 816.04 293.58 530.36 581.47 1,720.57 1,267.83 3,123.71 31 March 11,348.20 10,209.45 - - - 1.35 2017 As at 98.48 76.23 18.09 39.92 126.29 135.50 399.72 389.44 179.90 475.78 140.46 180.34 170.29 170.29 1,968.54 4,400.33 4,230.04 31 March ------0.47 2.53 2.09 1.10 0.50 0.18 3.62 1.11 5.10 6.99 0.32 0.32 24.01 23.69 Deletions - - - - 8.67 4.16 39.57 79.01 79.20 23.45 23.05 20.24 87.47 22.05 24.37 12.29 23.66 23.66 352.02 799.21 775.55 Amortisation Depreciation/ - - - 1.35 2016 As at 87.19 75.93 56.17 20.92 27.63 Accumulated depreciation / amortisation 155.97 1 April 126.83 323.24 312.33 157.55 391.93 119.52 146.95 146.95 1,621.62 3,625.13 3,478.18 2017 As at 28.94 996.38 720.42 392.12 752.02 158.43 784.86 216.35 182.95 360.27 333.50 197.21 530.36 581.47 197.21 1,290.79 1,721.92 1,408.29 5,092.25 31 March 15,748.53 14,439.49 - - - - 4.71 8.98 0.88 5.54 1.69 0.27 2.98 6.40 7.23 6.99 0.35 8.74 0.35 21.18 66.85 814.00 889.94 Deletions - - - - 1.99 Gross block 8.03 7.91 35.99 43.34 16.52 64.60 21.99 19.56 22.34 79.65 22.34 673.79 128.23 1,206.33 1,101.60 2,330.27 Additions 2016 As at 27.90 1 April 363.25 684.43 396.83 717.66 142.79 725.80 196.05 163.66 325.59 994.39 175.22 138.03 590.21 175.22 4,439.64 1,168.96 1,721.92 1,335.87 13,404.74 14,308.20 (ii) Property, plant and equipment and capital work-in-progress (ii) Property, Includes land in possession and occupation of the Company to extent 9 acre 26 guntas out of total 17 acres 44 guntas in Bengaluru allotted by Karnataka Industrial Areas Development Board (‘KIADB’) to the Company on lease cum sale basis for which is yet execute deed as at 31 March 2018. Promoters pursuant to clause 7.7 of the Investment Agreement and Clause 3.1(d) of the Shareholders’ Agreement signed in January 2008 between the Company, and Investors, a Promoter of the Company had together (“agreement”) right but not obligation to require the Company transfer the Land and Building at no consideration to him. This right has not been exercised till the date of these financial statements. On exercise of the right, the promoter was obligated to lease the asset to the Company for an initial term of 15 years with an extension of 10 years in accordance with the terms of aforesaid agreements at no consideration. The said land and building has been amortized over a period of 25 years based on the Management’s estimate lease term for above arrangement. As per the letter dated November 26,2015 by the promoter the above right was waived off by him and he would not be entitled to exercise any right in clause 3.1(d) of the said Shareholders’ Agreement, subject to the completion of public offering within a period one year from date receipt final observation letter from the The waiver was to be effective from the date of listing Company’s Securities and Exchange Board of India on the Draft Red Herring Prospectus filed by company. On the Company by all shareholders of the Company. this effect the said Shareholder’s Agreement was amended and duly executed shares on the stock exchanges. To National Stock Exchange on January 06, 2016, promoter’s right to the Company’s land ceased exist thereof. shares being listed the Bombay Stock Exchange and the These amounts are being depreciated Ahmedabad, Jaipur and Jamshedpur. Represents the cost of construction of building on the leasehold premises at Mysore, Kolkata, over the estimated useful life of asset, or lease term, whichever is lower. Particulars (A) Tangible assets (owned) (A) Tangible land (i) (ii) Freehold Building (iii) Building Electrical installation Medical equipment Office equipment Other equipment including air conditioners and fixtures Furniture Computers Vehicles Leasehold improvements Leasehold land (iv) Building (iii) Building (iii) Building (iii) tangible assets (A) Total in- progress (B) Capital work- (C) Goodwill (D) Intangible assets Computer software intangible assets (D) Total Grand total (A+B+C+D) Tangible asset leased: Tangible (i) (ii) (iii) 4 Annual Report 2017-18 189 Company Overview Statutory Reports Financial Statements Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) - - - 5.04 12.38 21.45 77.95 16.01 44.26 187.64 146.35 116.95 653.43 153.88 2,484.15 3,919.49 Island Ltd ( ` in million) 23.05 11.72 11.33 ` 8,227.44 million) are subject to first charge secure bank loans. ( ` in million) Health City Cayman As at 31-Mar-17 ------3.40 2.09 79.00 45.60 78.68 463.70 227.91 900.38 9.32 23.05 13.73 Foundation and Foundation Research Centre Dharamshila Cancer As at 31-Mar-18 ------` 5,182.99 million (previous year : 0.09 0.07 180.88 181.04 Private Limited NewRise HealthCare Cost or deemed cost Accumulated depreciation Net carrying amount 15.79 million) has been capitalised through capital work- in- progress. During the financial year 2017-18, project salary cost amounting to ` 51.35 million (previous year: ` 15.79 million) has been capitalised through capital work- As at 31 March 2018, properties with a carrying amount of During the year company has capitalised interest cost amounting to ` 59.47 million (previous year Nil). plant and equipments consequent to various business combinations (refer note 45) that occurred during the year: The Group has acquired the following property, Leasehold land represents allotted by various government authorities/ agencies in the states of Gujarat and Rajasthan. There are certain conditions including setting up of hospitals with certain capacity and within timelines as specified in the terms allotment (refer note 38 40). plant and equipments (other than property, the Company received As an arrangement with Modern Medical Institute for operating and maintaining the hospital in Raipur, land and building) whose carrying values are as follows: Particulars Third party contracts Electronic medical records Customer relationship Goodwill Computer software Total Vehicles Vehicles Freehold land (i) Freehold Building Medical equipment Other equipment including air conditioners Leasehold land Office equipments and fixtures Furniture Electrical installation Computers (vi) (vii) (viii) (ix) (iv) (v) 190 Narayana Hrudayalaya Limited Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) 5 Equity accounted investees (` in million) Particulars As at As at 31 March 2018 31 March 2017 Interest in associates Others (Trade investment) ISO Mauritius 37.49 32.51 [1,287 equity shares (previous year: 1,287 equity shares) of $ 1 each fully paid up along with a share premium of $ 999 per share] Health City Cayman Island Ltd., Cayman Islands - 895.77 [22,880 equity shares (previous year: 21,450 equity shares) of $ 0.01 each fully paid up along with share premium of $ 999.99 per share] Cura Technology Inc [390,000,000 equity shares (previous year: 390,000,000 equity shares) of $ 0.01 each fully paid 8.90 - up ] Share of (loss) of equity accounted investees (8.90) - 37.49 928.28 6 Investments (Non-current) (` in million) Particulars As at As at 31 March 2018 31 March 2017 Unquoted equity instruments Investment in associate Trimedx India Private Limited (refer note 44A) - 3.00 [91,947 ( previous year 30,005) equity shares of ` 100 each fully paid up with a premium of ` 499.26 per share on 4,770 equity shares] Unquoted debt instruments Investment in promissory note of Cura Technology Inc- amortised cost Cura Technology Inc 105.41 39.65 Less: share of loss ( refer note no 35) (58.02) (10.70) Investment in promissory note (net) 47.39 28.95 Accrued interest on the promissory note 2.90 0.59 50.29 32.54 7 Loans (Unsecured and considered good, unless otherwise stated) (` in million) Particulars As at As at 31 March 2018 31 March 2017 (a) Non-current To parties other than related parties Security deposits 204.71 129.68 Loan 13.00 - To related parties Security deposits 79.88 72.88 Loan 127.30 - 424.89 202.56 (b) Current To parties other than related parties Security deposits 78.26 30.07 Loan 4.00 - 82.26 30.07 Annual Report 2017-18 191 Company Overview Statutory Reports Financial Statements Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) 8 Other financial assets (Unsecured and considered good, unless otherwise stated) (` in million) Particulars As at As at 31 March 2018 31 March 2017 (a) Non-current Bank deposits (due to mature after 12 months from the reporting date) 1.08 1.33 Interest accrued but not due on fixed deposits 0.18 0.13 To related parties (refer note 33) Share application money pending allotment - 18.54 1.26 20.00 (b) Current To parties other than related parties Interest accrued on fixed deposits but not due 1.92 4.91 Interest accrued on security deposit 3.91 2.88 Unbilled revenue 132.19 127.17 Loans and advances 0.01 200.00 To related parties (refer note 33) Due for reimbursement of expenses 0.91 17.75 138.94 352.71 9 Income tax assets (net) (` in million) Particulars As at As at 31 March 2018 31 March 2017 Advance income tax and tax deducted at source, net 306.98 188.75 Income-tax paid under protest 10.00 10.00 316.98 198.75 10 Other assets (Unsecured and considered good, unless otherwise stated) (` in million) Particulars As at As at 31 March 2018 31 March 2017 (a) Non-current To parties other than related parties Security deposits 40.60 30.00 Capital advances 125.87 83.07 Prepaid expenses 82.52 102.85 Right to use assets 147.53 - Prepaid rent 170.68 229.00 (Unsecured considered doubtful) Prepaid rent 19.24 19.24 Less: provision for prepaid rent 19.24 19.24 - - Capital advances - 10.08 Less: Provision for doubtful advances - 10.08 - - To related parties (refer note 33) Prepaid expense 218.33 234.18 Prepaid rent 35.74 42.71 821.27 721.81 192 Narayana Hrudayalaya Limited Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) (` in million) Particulars As at As at 31 March 2018 31 March 2017 (b) Current To parties other than related parties Prepaid expenses 281.70 59.59 Balances with statutory /government authorities 5.49 4.44 Advance to vendors 95.55 55.47 Other loans and advances 45.76 21.55 Right to use assets 16.40 - Other assets 103.64 - Prepaid rent 16.33 13.89 (Unsecured considered doubtful) Prepaid rent 0.24 0.24 Less: provision for prepaid rent 0.24 0.24 - - To related parties (refer note 33) Prepaid expense 15.79 15.72 Prepaid rent 6.97 6.97 Due for reimbursement of expenses 5.56 21.49 593.19 199.12 11 Inventories (Valued at lower of cost and net realisable value) (` in million) Particulars As at As at 31 March 2018 31 March 2017 Medical consumables, drugs and surgical equipments 849.50 531.55 Less: Provision for write down to net realisable value 13.26 7.95 836.24 523.60 12 Trade receivables (` in million) Particulars As at As at 31 March 2018 31 March 2017 Unsecured, considered good 2,789.76 1,569.10 Unsecured, considered doubtful 302.03 127.66 3,091.79 1,696.76 Loss allowance Unsecured considered doubtful (302.03) (127.66) Net trade receivables 2,789.76 1,569.10 Of the above, trade receivables from related parties are as follows: Trade receivables (refer note 33) 374.56 67.59 Credit loss allowance (0.66) (3.29) Net trade receivable from related parties 373.90 64.30 The Company uses a provision matrix to determine expected credit loss on portfolio of its trade receivable. The provision matrix is based on its historically observed default rates over the expected life of the trade receivable and is adjusted for forward-looking estimates. At each reporting period, the historically observed default rates are updated and changes in forward-looking estimates are analysed. The expected credit loss allowance is based on the ageing of the days the receivables are due and the rates as given in the provision matrix. The provision matrix at the end of the reporting period is as follows: Annual Report 2017-18 193 Company Overview Statutory Reports Financial Statements Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) India Ageing Within due date Due date to 1 Year More than 1 year Category from due date ESI/CGHS/SCHEMES 1.76% 12.02% 52.88% Others 0.63% 8.94% 51.87% Rest of the world - Cayman Islands Ageing Category 0 – 150 days 151 – 270 days 271 – 364 days >= 365 days Default rate Nil 25.00% 50.00% 100.00% The Company’s exposure to credit risk, currency risks and loss allowances are disclosed in note 51 13 Cash and bank balances (` in million) Particulars As at As at 31 March 2018 31 March 2017 (a) Cash and cash equivalents Cash on hand 30.93 10.31 Balance with banks In current accounts 294.87 252.12 In deposit accounts (with original maturity of 3 months or less) 7.49 333.29 262.43 (b) Bank balances other than above -In deposit accounts (due to mature within 12 months of the reporting date)* 19.25 78.77 19.25 78.77 * The above deposits are restrictive as they pertain to bank guarantee. For the purpose of the Statement of cash flow, cash and cash equivalents comprise the following: (` in million) Particulars As at As at 31 March 2018 31 March 2017 Cash on hand 30.93 10.31 Balance with banks In current accounts 294.87 252.12 325.80 262.43 Less: Bank overdraft used for cash management purpose 375.81 90.22 Cash and cash equivalents in the statement of cash flow (50.01) 172.21 14 (a) Equity share capital (` in million) Particulars As at As at 31 March 2018 31 March 2017 Authorised 309,000,000 * equity shares (previous year: 300,000,000 equity shares) of ` 10 each 3,090.00 3,000.00 71,000,000 * (previous year : Nil) Preference shares of ` 10 each 710.00 - Issued, subscribed and paid up 204,360,804 equity shares (previous year: 204,360,804 equity shares) of ` 10 each, fully paid up 2,043.61 2,043.61 2,043.61 2,043.61 *The amalgamation of NewRise Healthcare Private Limited with the Company was approved by Ministry of Corporate Affairs on 4 October 2017 and accordingly as per the scheme of amalgamation the authorised share capital of the company has been increased by 9,000,000 equity shares and 71,000,000 preference shares. 194 Narayana Hrudayalaya Limited Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) (i) Reconciliation of number of equity shares outstanding at the beginning and at the end of the year: (` in million except for number of shares) Particulars As at 31 March 2018 As at 31 March 2017 Number of shares Amount Number of shares Amount Shares outstanding at the beginning of the year 204,360,804 2,043.61 204,360,804 2,043.61 Shares issued during the year - - - - Shares outstanding at the end of the year 204,360,804 2,043.61 204,360,804 2,043.61 (ii) Rights, preference and restrictions attached to equity shares: The Company has equity shares having a nominal value of ` 10 each. Accordingly, all equity shares rank equally with regard to dividend and share in the Company’s residual assets. Each holder of equity shares is entitled to one vote per share. The equity shares are entitled to receive dividend as declared from time to time. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by shareholders. The Company has preference shares having a nominal value of ` 10 each. Preference shares are non-convertible, non-cumulative, non- participating and carry preferential right vis-à-vis equity shares of the Company with respect to payment of dividend and repayment in case of winding up or repayment of capital and shall carry voting rights as per the provisions of Section 47(2) of the Companies Act, 2013. (iii) Particulars of shareholders holding more than 5% equity shares: Particulars As at 31 March 2018 As at 31 March 2017 Number of shares % holding Number of shares % holding Dr Devi Prasad Shetty 64,700,571 31.66% 64,700,571 31.66% Shakuntala Shetty 62,083,095 30.38% 62,083,095 30.38% CDC Group PLC 11,765,046 5.76% 11,765,046 5.76% Ashoka Investment Holdings Limited - - 10,971,130 5.37% 138,548,712 67.80% 149,519,842 73.17% (iv) The Company has not bought back any shares during the period of five years immediately preceding the last balance sheet date. Further, the Company has not issued any shares for consideration other than cash during the period of five years immediately preceding the last balance sheet date except, the issue of 199,654,247 bonus shares on 25 March 2015 and conversion of Optionally Convertible Debentures along with accrued interest into 4,360,804 equity shares on 1 December 2015. Annual Report 2017-18 195 Company Overview Statutory Reports Financial Statements Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) 14 (b) Other Equity (` in million) Particulars As at As at 31 March 2018 31 March 2017 Capital reserve At the commencement of the year 1.54 1.54 Add: Adjustment towards acquisition of subsidiary 142.38 - At the end of the year 143.92 1.54 Securities premium account At the commencement of the year 4,901.24 4,901.24 Add: Securities premium on issue of equity shares during the year - - At the end of the year 4,901.24 4,901.24 Treasury shares At the commencement of the year (20.07) (20.40) Add: Additions during the year 0.54 0.33 At the end of the year (19.53) (20.07) Share options outstanding At the commencement of the year 93.42 34.02 Add: Amounts recorded on grants during the year 42.46 59.40 At the end of the year 135.88 93.42 General reserve At the commencement of the year 250.00 250.00 At the end of the year 250.00 250.00 Retained earning At the commencement of the year 2,285.28 1,455.21 Add: Net profit after tax transferred from statement of profit and loss 514.02 830.52 Less: Share of non controlling interest (0.55) Less: Liquidation of subsidiary (6.99) (0.45) At the end of the year 2,791.76 2,285.28 Other Comprehensive Income Foreign currency translation reserve At the commencement of the year 83.40 102.57 Add: Additions during the year 45.27 (19.17) At the end of the year 128.67 83.40 Re-measurement of defined benefit plans At the commencement of the year (7.60) (7.97) Add: Addition during the year 2.04 0.37 Less: Share of non controlling interest (0.00) - At the end of the year (5.56) (7.60) Effective portion of cash flow hedge reserve At the commencement of the year - - Add: Addition during the year (12.52) - At the end of the year (12.52) - 8,313.86 7,587.21 Capital reserve Capital reserve was created at the time of acquisition of hospital in Barasat and acquisition of the subsidiary Health City Cayman Islands Ltd . Securities premium Securities premium is used to record the premium received on issue of shares. It is utilised in accordance with the provisions of the Companies Act, 2013. Treasury shares Own equity instruments that are reacquired (treasury shares) are recognised at cost and deducted from other equity. Share options outstanding account The Group has established a share based payment plan for eligible employees of the Company, its subsidiaries or associates. Also refer note 42 for further details on these plans. General reserve General reserve is used from time to time to transfer profits from retained earnings for appropriate purposes. Foreign currency translation reserve The foreign currency translation reserve has arisen on account of translation of financial statements / information of foreign subsidiaries and associates in accordance with Ind AS- 21 The Effects of changes in Foreign Exchange Rates. 196 Narayana Hrudayalaya Limited Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) 15 Non controlling interests (` in million) Particulars As at As at 31 March 2018 31 March 2017 Balance at the beginning of the year 2.36 2.73 Share of profit / (loss) for the year 0.55 (0.37) Balance at the end of the year 2.91 2.36 16 Borrowings (` in million) Particulars As at As at 31 March 2018 31 March 2017 (a) Non-current (i) Secured Term loans From banks (refer note I) 7,639.61 2,076.87 Less: Current maturity of long term debt [refer note 17 (b)] (676.29) (278.86) 6,963.32 1,798.01 (b) Current (i) Secured Loans repayable on demand Bank overdrafts (refer note II) 375.81 90.22 375.81 90.22 I Term loans from banks : Sl No. Details of repayment terms, interest and maturity Nature of security (i) Term loan from HSBC Bank : ` 33.00 million (previous year : ` 99.00 million). It is repayable Secured via mortgage of title deeds on the in 2 quarterly instalments from the reporting date, ( previous year 5 quarterly instalments). immovable property of Narayana Hospital Interest is charged at 8.10% p.a.(previous year 8.80%) Private Limited. (ii) Term loan from HSBC Bank : ` 37.50 million (previous year: ` 87.50 million ). It is repayable in 3 quarterly instalments from the reporting date (previous year 7quarterly instalments). Interest is charged at 8.10% p.a.(previous year 8.80%) (iii) Term loan from HSBC Bank : ` 19.00 million (previous year : ` 38.00 million). It is repayable in 4 quarterly instalments from the reporting date (previous year 8 quarterly instalments). Interest is charged at 8.10 % p.a (previous year: 9.50% p.a,) (iv) Term loan from HSBC Bank : ` 270.00 million (previous year : ` nil ). It is repayable in 20 Movable Fixed Assets created out of the loan by quarterly instalments (previous year: nil) from December 2019 after moratorium period of Narayana Hrudayalaya Limited 18 months from date of 1st disbursement. Date of 1st disbursement is 12 March 2018. Interest is charged at 8.30% p.a. (previous year: nil) (v) Term loan from ICICI Bank: ` 900.00 million (previus year : ` 580.00 million). Repayable in Movable Fixed Assets created out of the loan by 96 monthly instalments (previous year: nil) from 31 January 2019 after 3 years Moratorium Narayana Hrudayalaya Limited from date of 1st Disbursement. Date of 1st Disbursement 19th January 2016. Interest is charged at 8.50% p.a., (previous year: 9.35% p.a.) (vi) Foreign currency loan taken from EXIM Bank : ` nil ($ nil ) [previous year : ` 145.88 million( Exclusively charge on land and building of $ 2.25 million)]. Fully repaid during the year (previous year: 10 quarterly Instalments). Narayana Hrudayalaya Limited located over Sy Interest was linked to the Libor (6 month) + 340 base points. (previous year: Libor (6 NO:135/1 and 135/2 Kittiganahalli Attibele Hobli, month) + 340 base points). Anekal Taluk, Bangalore. Annual Report 2017-18 197 Company Overview Statutory Reports Financial Statements Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) Sl No. Details of repayment terms, interest and maturity Nature of security (vii) Foreign currency loan taken from EXIM Bank : ` 1,626.10 million ($ 25 million) [ previous Exclusive charge on the Land and Building of year: nil ]. It is repayable in 28 quarterly instalments from January 2019 after Moratorium Narayana Hrudayalaya Limited located at Sy. period of 12 months from the date of 1st disbursement (previous year: nil). Date of 1st No. 135/1 and 135/2 with an aggregate extent of disbursement is 2nd January 2018 Interest is linked to the Libor (6 month) + 175 base Ac 4.35 guntas located at Narayana Health City, points. (previous year:nil). Bommasandra, Bangalore, Exclusive charge on the Land and Building located at Sy. No. 1/1, 1/2, 2/2, and 2/3 with an aggregate extent of Ac 3.24 guntas located at Narayana Health City, Bommasandra, Bangalore, Appropriate charge on the other tangible specific movable fixed assets. (viii) Term loan from SBI: ` 580.00 million (previous year: ` 200.00 million). Repayable in Movable Fixed Assets created out of the loan 96 monthly instalments from March 2019 after 2 years Moratorium from date of 1st and exclusively charge on land and building disbursement (previous year: nil). Date of 1st Disbursement 31st March 2017. Interest is Gurugram hospital of Narayana Hrudayalaya charged at 8.15% p.a.(previous year: 8.35% p.a.) Limited located in Plot # 3201, Phase III, DLF (ix) Term loan from SBI: ` 1,170.85 million (previous year: ` nil). Repayable in 31 quarterly city, Gurgaon, Harayana. instalments from December 2019 after 2 years Moratorium from date October 2017 (previous year: nil). Interest is charged at 8.15% p.a.(previous year: nil). (x) Term loan from Yes Bank Ltd - FCNR : ` 351.65 million (previous year: ` 355.25 million ) Exclusive charge on Movable Fixed assets of fully repayable on 25th June 2018 Interest @ 09.73% p.a.(previous year: 9.73%, ) (present and future) and current assets of the Narayana Hrudayalaya Surgical Hospital Private Limited (present and future) excluding those charged to any other lender/vendor and those charged to Yes Bank LC facilities. (xi) Term loan from Yes Bank Ltd: ` 49.57 million (previous year : nil ) repayable in 40 quarterly Exclusive charge on Movable Fixed assets instalments from May 2018 Interest @ 1 year MCLR + 10 basis points (previous year: nil) (present and future) and current assets of Narayana Hrudayalaya Surgical Hospital Private Limited (present and future) excluding those charged to any other lender/vendor and those charged to Yes Bank LC facilities. (xii) Term loan from State Bank Of India: ` 134.83 million (previous year : ` 181.66 million). It is Term loan from State Bank Of India, SME Branch, repayable in 10 quarterly installments from the reporting date, (previous year : 14 quarterly Howrah are secured by equitable mortgage of instalments). Interest is linked to the base rate plus 0.35% Base rate as on 31 March 2018 3.0832 acre of leasehold land (Lease valid till being 9.25% p.a. (previous year : 9.25% p.a.) 2036) of Meridian Medical Research & Hospital (xiii) Term loan from State Bank Of India: ` 33.90 million (previous year : ` 45.88 million ). It is Limited and 5 storey building comprising of repayable in 10 quarterly instalments from the reporting date, (previous year : 14 quarterly old hospital at JL No-38 Mouza Podra, PS instalments). Interest is linked to the base rate plus 0.35% Base rate as on 31 March 2018 Sankrail ranihati, Howrah (on pari-passu basis) being 9.25% p.a. (previous year : 9.25% p.a.) Co operative Society Ltd, Title deed no 396 of Old hospital purchased by the company (xiv) Term loan from State Bank Of India: ` 233.14 million (previous year : ` 246.88 million). It is & by hypothecation of all movable assets repayable in 27 quarterly instalments from the reporting date i.e. 31 March 2018 (previous including medical equipments, furniture & other year : 31 quarterly instalments). Interest is linked to the base rate plus 0.35%. Base rate as miscellaneous fixed assets of the Company on 31 March 2018 being 9.15% p.a. (previous year : 9.25% p.a.) including a first charge on inventories and trade (xv) Term loan from State Bank Of India: ` 84.81 million (previous year : ` 96.82 million) It is receivables of the company ; and corporate repayable in 26 quaterly instalments from the reporting date i.e. 31 March 2018 (previous guarantee of Narayana Hryudalaya Limited. year : 30 quarterly instalments). Interest is linked to the base rate plus 0.35% (Base rate as on 31st March 2018 being 9.25% p.a. (previous year : 9.25% p.a.) (xvi) Term loan from State Bank Of India: ` 33.85 million (previous year : ` Nil) It is repayable in 11 quaterly instalments from the reporting date i.e. 31 March 2018 (previous year : Nil). Interest is linked to the base rate plus 0.35% (Base rate as on 31st March 2018 being 9.25% p.a. (previous year : Nil) (xvii) Term loan from FCIB: ` 2081.41 million (previous year : ` Nil) It is repayable in quaterly Secured by corporate guarantee of Narayana instalments from August 2018 (previous year : Nil). Interest is linked to the Libor (3 month) Hrudayalya Limited. + 175 base points. (previous year: nil ). 198 Narayana Hrudayalaya Limited Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) II Overdraft and Cash Credit facilities: Sl No. Details of repayment terms, interest and maturity Nature of security (i) Overdraft facility from Yes Bank Limited ` 56.56 million (previous year: Nil) carry interest It is secured by current assets (both present rate of 0.30% above the base rate (previous year : base rate as being 0.25% p.a.), to be and future), subservient charge on movable paid on monthly basis. fixed assets of Narayana Hrudayalaya Surgical Hospital Private Limited and corporate guarantee of Narayana Hrudayalaya Limited. (ii) Overdraft from State Bank Of India: ` 41.46 million (previous year: ` 45.34 million). It is ‘Overdraft from State Bank of India, SME Branch, repayable on demand linked to the base rate plus 0.35%. Base rate as on 31 March 2018 Howrah are secured by equitable mortgage of being 9.25%p.a. (previous year : 9.25%,p.a). 3.0832 acre of leasehold land (lease valid till 2036) in the name of Company and 5 storey building comprising of old hospital at JL No-38 Mouza Podra, PS Sankrail ranihati, Howrah (on pari-passu basis) Co-operative Society Ltd, Title deed no 396 of Old hospital purchased by the company & by hypothecation of all movable assets including medical equipments, furniture & other miscellaneous fixed assets of the Meridian Medical Research & Hospital Limited including a first charge on inventories and trade receivables of the Meridian Medical Research & Hospital Limited ; and corporate guarantee of Narayana Hryudalaya Limited (Holding Company). (iii) Overdraft facilities from HSBC bank ` 277.79 million (previous year: ` nil) carry interest These are secured by pari passu charge by ranging between 7.90% - 9.25% (previous year: nil) computed on a monthly basis on the way of hypothecation of inventories, trade actual amount utilised and are repayable on demand. receivables, and specific charge on fixed assets of Narayana Hrudayalaya Limited. (iv) Overdraft facilities from YES bank ` nil (previous year: ` 44.88 million) carry interest nil These are secured by pari passu charge by (previous year: carry interest ranging between 8.40% - 10.25%) computed on a monthly way of hypothecation of inventories, trade basis on the actual amount utilised and are repayable on demand. receivables, and specific charge on fixed assets of Narayana Hrudayalaya Limited. 17 Other financial liabilities (` in million) Particulars As at As at 31 March 2018 31 March 2017 (a) Non-current Payable towards share purchased for Employee Stock Option Plan (ESOP) Trust 20.40 20.40 Creditors for capital goods 52.82 - Liability towards business acquistion 887.10 - Liability towards assets replacement cost 67.98 38.79 Derivatives designated and effective as hedging instruments carried at fair value Interest rate swap 16.50 - 1,044.80 59.19 (b) Current Current maturities of long-term borrowings with banks * 676.29 278.86 Liability towards business acquistion 175.40 - Interest accrued but not due on borrowings 29.74 0.74 Deposits received 1.72 - Creditors for capital goods 185.95 411.91 Other financial liabilities 19.81 1.28 1,088.91 692.79 * The Group’s exposure to currency and liquidity risks related to other financial liabilities are disclosed in note no 51. Annual Report 2017-18 199 Company Overview Statutory Reports Financial Statements Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) 18 Provisions (` in million) Particulars As at As at 31 March 2018 31 March 2017 (a) Non-current Provision for employee benefits Gratuity 144.42 150.84 144.42 150.84 (b) Current Provision for employee benefits Gratuity 61.57 12.42 Compensated absences 180.97 109.81 242.54 122.23 19 Other liabilities (` in million) Particulars As at As at 31 March 2018 31 March 2017 (a) Non-current Unearned revenue 17.63 18.75 Payable towards Gratuity Trust - 1.06 Rent equalisation reserve 53.51 35.57 Deferred liability for assets funding 5.43 - Others 2.51 - Deferred government liability for EPCG Licence** 6.10 - Deferred government grant* 1,264.46 1,297.75 1,349.64 1,353.13 (b) Current Deferred liability for assets funding 1.62 - Advance from patients 132.17 101.42 Unearned revenue 10.65 7.66 Deferred government grant* 35.58 37.57 Statutory liabilities (vat, sales tax, tds etc.) 145.09 104.96 Other liabilities 91.94 2.47 To related parties Other payables 10.43 - Unearned revenue 1.00 - 428.48 254.08 Summary of the government grant received by the Group and its annual amortisation:- Nature Original grant Annual amortisation amount Monetary grant received for purchasing Property, plant and equipment 220.00 13.97 Non- Monetary grant received for importing Property, plant and equipment 6.10 - Land allotted at a concessional rate for setting up hospital 1,278.53 21.31 *During the financial year 2013-14, the Company had received capital grant from the Assam Government amounting to ` 220 million for purchase of fixed assets for operating the hospital in Assam. The Company has recognized this grant as deferred income at fair value which is being amortised over the useful life of the fixed assets in proportion in which the related depreciation is recognized. The Group had been allotted land at concessional rate from Government of Rajasthan and Gujarat in the financial year 2007-08 and 2008-09 respectively for setting up hospitals. The Group has recognized all the grants as deferred income at fair value. The deferred income pertaining to land is being amortised over the life of the building whereas for the fixed assets is being amortised over the useful life of the fixed assets in proportion to which the related depreciation is recognized. 200 Narayana Hrudayalaya Limited Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) **During the financial year 2017-18, the Company had received capital grant in the form of EPCG licence from Government of India amounting to ` 6.10 million for import of capital goods subject to fulfilment of export obligation in next 6 years. The Company has recognized this grant as deferred government liability for EPCG licence at fair value. The company will recognize deferred grant income in the statement of profit and loss as per Ind AS. 20 Trade payables (` in million) Particulars As at As at 31 March 2018 31 March 2017 Total outstanding dues of micro enterprises and small enterprises 18.16 11.50 Total outstanding dues of creditors other than micro enterprises and small enterprises* 2,943.76 2,054.31 2,961.92 2,065.81 *includes payables to related parties (refer note 33) The Group’s exposure to currency and liquidity risks related to trade payable is disclosed in note 51 21 Income tax liabilities (net) (` in million) Particulars As at As at 31 March 2018 31 March 2017 Provision for tax (net) - 0.43 - 0.43 22 Revenue from operations (` in million) Particulars For the year ended For the year ended 31 March 2018 31 March 2017 Income from medical and healthcare services 21,339.75 17,687.74 Sale of medical consumables and drugs 1,205.79 794.02 Other operating revenue: Other healthcare services 21.52 39.85 Teleradiology income 16.90 16.82 Revenue share income 34.20 30.21 Revenue from nursing school 11.78 9.50 Other medical and health care services 0.18 - Income from patients amenities 67.34 59.34 Income from arrangement with trust (refer note 46(b)) 111.61 144.17 22,809.07 18,781.65 23 Other income (` in million) Particulars For the year ended For the year ended 31 March 2018 31 March 2017 Donations received - 0.06 Interest income on - Bank deposits 5.30 6.97 - Unsecured loan 8.07 0.71 - Others 14.12 35.06 Interest income from financial asset at amortised cost 15.32 9.64 Government grant 35.28 37.57 Guarantee commission 8.84 14.95 Profit on sale of fixed asset 0.20 - Profit on sale of investment 3.10 5.11 Miscellaneous income 98.77 64.75 189.00 174.82 Annual Report 2017-18 201 Company Overview Statutory Reports Financial Statements Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) 24 Changes in inventories of medical consumables, drugs and surgical equipments (Increase) / decrease (` in million) Particulars For the year ended For the year ended 31 March 2018 31 March 2017 Inventory at the beginning of the year 523.60 497.47 Add: Inventory on acquisiton of subsidiary (refer note 45 (b)) 211.42 - Inventory at the end of the year 860.23 527.28 (125.21) (29.81) 25 Employee benefits (` in million) Particulars For the year ended For the year ended 31 March 2018 31 March 2017 Salaries, wages and bonus 4,081.17 3,327.56 Contribution to provident and other funds (refer note 37) 328.72 278.26 Share based payment to employees (refer note 42) 42.46 59.40 Staff welfare expenses 204.51 86.88 4,656.86 3,752.10 During the financial year 2017-18, project salary cost amounting to ` 51.35 million (previous year: ` 15.79 million) has been capitalised through Capital work- in- progress (refer note 4). 26 Other expenses (` in million) Particulars For the year ended For the year ended 31 March 2018 31 March 2017 Hospital operating expenses Power and fuel 650.82 498.97 Hospital general expenses 293.75 263.09 House keeping expenses 632.29 516.83 Patient welfare expenses 323.10 290.11 Rent 581.55 482.13 Medical gas charges 72.41 61.75 Biomedical wastage expenses 13.06 12.28 Repairs and maintenance - Hospital equipments 544.98 432.06 - Buildings 88.35 60.37 - Others 353.64 261.89 3,553.95 2,879.48 Administrative expenses Travel and conveyance 184.96 156.49 Security charges 205.12 176.77 Printing and stationery 123.65 106.78 Rent 112.00 76.59 Advertisement and publicity 509.85 374.87 Legal and professional fees 178.69 167.95 Payment to auditors (refer note (i) below) 8.00 12.91 Business promotion 295.66 173.21 Telephone and communication 73.64 52.54 Bank charges 78.12 57.78 Insurance 77.41 44.08 Corporate social responsibility (refer note (ii) below) 22.82 13.60 Rates and taxes 54.96 34.19 Books and periodicals 21.53 12.74 202 Narayana Hrudayalaya Limited Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) (` in million) Particulars For the year ended For the year ended 31 March 2018 31 March 2017 Provision for doubtful debts 83.06 (58.98) Bad debts written off 30.27 127.69 Donations paid 6.23 - Loss on sale of fixed assets 14.83 14.10 Foreign exchange loss, (net) 15.47 2.49 Provision for prepaid rent - 19.48 Assets written off - 27.48 Miscellaneous expenses 26.54 54.04 2,122.81 1,646.80 5,676.76 4,526.28 (i) Payment to auditors* (` in million) Particulars For the year ended For the year ended 31 March 2018 31 March 2017 As an auditor Audit fee 6.60 9.71 Limited review 1.40 2.21 In other capacity: Other services (certification fees) - 0.25 Reimbursement of expenses - 0.74 Total 8.00 12.91 *excluding taxes (ii) Corporate social responsibility Consequent to the requirements of Section 135 of the Companies Act 2013, the Company has made contributions as stated below. The same is in line with activities specified in Schedule VII of the Companies Act, 2013. (` in million) Particulars For the year ended For the year ended 31 March 2018 31 March 2017 a) Gross amount required to be spent by Group during the year 19.36 13.22 b) Amount spent during the year ( in cash) (i) Construction/acquisition of any asset - - (ii) On purposes other than above 22.82 13.60 22.82 13.60 27 Finance costs (` in million) Particulars For the year ended For the year ended 31 March 2018 31 March 2017 Interest expense on financial liabilities measured at amortised cost -term loans from banks 255.45 184.16 -bank overdraft 14.42 7.53 -commercial papers 4.37 0.50 -others 165.44 1.64 Other borrowing costs 1.85 0.82 Net loss on foreign currency transactions and translation to the extent 20.14 7.63 regarded as borrowing costs Finance cost on finance lease obligations 5.88 15.75 467.55 218.03 During the year the company has capitalised interest cost amounting to ` 59.47 million (previous year : Nil) Annual Report 2017-18 203 Company Overview Statutory Reports Financial Statements Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) 28 Depreciation and amortisation expense (` in million) Particulars For the year ended For the year ended 31 March 2018 31 March 2017 Depreciation of property, plant and equipment (refer note 4) 923.33 775.55 Amortisation of intangible assets (refer note 4) 76.17 23.66 999.50 799.21 29. Contingent liabilities and commitments (i) Contingent liabilities (` in million) Particulars As at As at 31 March 2018 31 March 2017 Claims against the Group not acknowledged as debts in respect of: a) Sales tax (refer note A below) 31.83 - b) Income tax (refer note B below) 12.17 12.17 c) Customer claim (refer note C below) - 3.50 Guarantees: a) Bank guarantee 25.00 465.65 Notes: A. Sales Tax a) For financial year 2011-12, the Company has received a notice proposing levy of value added tax on sale of food to patients and sale of implants, medicines and consumables under Karnataka Value Added Tax Act, 2003. Based on Company’s submission, the department has issued an order with a demand of ` 10.31 million by levying tax on sale of food to patients . Against this demand, the Company has deposited ` 3.1 million with the department and filed an application for stay with Joint Commissioner of Commercial Taxes( Appeal). b) For financial year 2012-13, the Company has received a notice proposing levy of value added tax on sale of food to patients and sale of implants, medicines and consumables under Karnataka Value Added Tax Act, 2003.Based on Company’s submission, the department has issued an order with a demand of ` 21.52 million by levying tax on sale of food to patients. Subsequent to year end, against this demand the Company has deposited ` 6.45 million and filed an application for stay with Joint Commissioner of Commercial Taxes( Appeal). B. Income Tax For assessment year 2009-2010 the Group had received an assessment order under section 143(3) of the Income Tax Act, 1961 on 28 December 2011 with a demand of ` 12.17 million. Against this demand, the Company had paid ` 10.00 million under protest and filed an appeal with the Commissioner of Income Tax (Appeals) (CIT(A)). CIT(A) had issued an order in favour of the Company. The department then filed an appeal with the Income Tax Appellate Tribunal (ITAT) against the order of CIT(A). On 23 January 2015, ITAT had issued an order in favour of the Company. Subsequently, the department has filed an appeal with High Court of Karnataka challenging the order of ITAT. C. Customer claim These pertained to customer claims for the previous year of ` 13.50 million as against an insurance coverage of ` 10.00 million for one of the subsidiary companies. These were pending before district consumer and state consumer forums. The Group believes that other disputes, lawsuits and claims, including commercial matters, which arise from time to time in the ordinary course of business will not have any material adverse effect on its financial statements in any given accounting year. (ii) Commitments Estimated amounts of contracts remaining to be executed on capital account (net of advances) and other commitments not provided for amounts to ` 150.03 millions (previous year: ` 219.09 millions). 30. Leases The Group has taken various medical equipment, hospital premises, office and residential premises under operating leases. The leases typically run for a term ranging from one to twenty years, with an option to renew the lease after the term completion. The escalation clause in these arrangements range from 5% to 10%. 204 Narayana Hrudayalaya Limited Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) (i) Future minimum lease payments under non-cancellable operating leases are as follows: (` in million) Particulars As at As at 31 March 2018 31 March 2017 Not later than 1 year 136.79 81.95 Later than 1 year and not later than 5 years 527.91 334.23 Later than 5 years 1,097.09 505.15 (ii) Amounts recognised in consolidated statement of profit and loss (` in million) Particulars For the year ended For the year ended 31 March 2018 31 March 2017 Cancellable 525.18 467.34 Non-cancellable 168.37 91.38 693.55 558.72 31 Management agreements The Company has management agreement for the management, operation and utilization of their hospital facilities. As a consideration towards the aforesaid arrangement, the Company is obligated to offer discounts to patients nominated by the trust at free of cost/ concession as per the terms of the agreement. The discounts thus offered have been recognised as revenue amounting to ` 12.11 millions (previous year: ` 12.11 millions) with a corresponding charge to rent expense. 32 Segment information Operating Segments Ind AS 108 “Operating Segment” (“Ind AS 108”) establishes standards for the way that public business enterprises report information about operating segments and related disclosures about products and services, geographic areas, and major customers. Based on the “management approach” as defined in Ind AS 108, Operating segments are to be reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker (CODM). The CODM evaluates the Group’s performance and allocates resources on overall basis. The Group’s sole operating segment is therefore ‘Medical and Healthcare Services’. Accordingly, there are no additional disclosures to be provided under Ind AS 108, other than those already provided in the financial statements. Entity wide disclosures - Geographical information Geographical information analyses the Group’s revenue and non-current assets by the group’s country of domicile (i.e. India) and other countries. In presenting the geographical information, segment revenue has been based on the geographical location of the customers and segment assets which have been based on the geographical location of the assets. (i) Revenue from operations (` in million) Particulars For the year ended For the year ended 31 March 2018 31 March 2017 India 22,039.37 18,642.72 Rest of the world - Cayman Islands 769.70 138.93 22,809.07 18,781.65 (ii) Non-current assets * (` in million) Particulars As at As at 31 March 2018 31 March 2017 India 16,045.13 12,268.76 Rest of the world - Cayman Islands 3,923.53 - 19,968.66 12,268.76 * Non-current assets exclude financial instruments, deferred tax assets and equity accounted investees Annual Report 2017-18 205 Company Overview Statutory Reports Financial Statements Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) (iii) Investment in associates accounted for by the equity method (` in million) Particulars As at As at 31 March 2018 31 March 2017 Mauritius 37.49 32.51 Cayman Islands** - 895.77 37.49 928.28 **Includes loss of ` 8.9 million recorded against the investment value of ` 8.9 million for the current and previous year. 33. Related party disclosures (a) Details of related parties Nature of relationship Name of related parties Dr. Devi Prasad Shetty - Chairman Dr. Ashutosh Raghuvanshi - Managing Director Key Management Personnel (KMP) Viren Shetty - Whole-time Director Kesavan Venugopalan - Chief Financial Officer Gene Thompson (with effect from 2 January, 2018) Dr. Varun Shetty Relatives of KMP Dr. Anesh Shetty Shakuntala Shetty Associate TriMedx India Private Limited (TriMedx) Health City Cayman Islands Ltd (HCCI) ( uptill 1 January 2018) (refer note 34) Associates of subsidiary Cura Technologies Inc.(with effect from 15 November 2016) ISO Healthcare (with effect from 5 July 2016) Narayana Health Academy Private Limited (NHAPL) Kateel Software Private Limited Hrudayalaya Pharmacy Charmakki Infrastructures Thrombosis Research Institute Narayana Hrudayalaya Foundation (NHF) Mazumdar Shaw Medical Foundation (MSMF) Daya Drishti Charitable Trust Enterprises under control/ joint control of KMP and their Narayana Hrudayalaya Charitable Trust (NHCT) (uptill 20 March 2017) relatives Asia Heart Foundation (AHF) Healthcity Development Limited ( with effect from 2 January 2018) Consulting service limited ( with effect from 2 January 2018) Have a Heart Foundation ( with effect from 2 January 2018) Office supply Ltd ( with effect from 2 January 2018) Wyndham Reef Resort Grand Cayman ( with effect from 2 January 2018) High Rock Property Maintenance (with effect from 2 January 2018) Enterprises where control of the Company exists Narayana Hrudayalaya Private Limited Employees Group Gratuity Trust 206 Narayana Hrudayalaya Limited Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) - (-) (-) (-) (-) (-) (-) 0.16 0.06 7.71 7.00 3.74 2.56 1.01 Total Total 21.69 14.38 25.00 12.72 10.06 97.27 (0.25) (0.48) (6.38) 145.05 (23.76) (58.94) (25.00) (12.42) (10.06) (11.46) ( ` in million) ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) KMP under relative of significant influence of Enterprises - - (-) (-) (-) (-) (-) (-) (-) 0.16 0.06 7.00 3.74 2.56 1.01 21.69 14.38 25.00 12.72 10.06 97.27 (0.25) (0.48) (6.38) 145.05 (58.94) (25.00) (12.42) (10.06) (11.46) relatives control of control/joint Entity under Entity under KMP and their ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) 7.71 (23.76) Associates Associate/ of subsidiary ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) KMP Relative of ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) Key Key Personnel Personnel Management Transactions with related parties during the year ended 31 March 2018 with related parties during the year Transactions Figures in brackets are for previous year. Daya Drishti Charitable Trust NHF AHF Reimbursement of expenses HCCI Interest income on security deposit Charmakki Infrastructures TOTAL High Rock Property Maintenace Healthcity Development Limited Office Supply Ltd Other Expense Consulting Services Ltd TOTAL MSMF Charmakki Infrastructures AHF Rent expense NHF Transactions Related party disclosures (b) 33 Annual Report 2017-18 207 Company Overview Statutory Reports Financial Statements Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) - - - - (-) (-) (-) (-) (-) (-) 8.84 4.03 3.92 0.10 0.01 8.58 3.42 0.69 7.99 0.03 0.03 Total Total 86.44 (6.41) (0.10) (6.31) (1.98) (2.67) (14.95) (98.76) (96.09) (24.49) (138.93) ( ` in million) ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) KMP under relative of significant influence of Enterprises ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) 4.03 3.92 0.10 0.01 3.42 0.28 0.03 0.03 (6.41) (0.10) (6.31) (0.73) relatives control of control/joint Entity under Entity under KMP and their ------(-) (-) (-) (-) (-) (-) (-) (-) (-) 8.84 8.58 0.69 7.71 86.44 (1.98) (2.67) (14.95) (98.76) (96.09) (23.76) (138.93) Associates Associate/ of subsidiary ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) KMP Relative of ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) Key Key Personnel Personnel Management Guarantee commission HCCI Sales of medical consumables and drugs HCCI Total Have A Heart Foundation Consulting Services Ltd NHF Revenue from healthcare services NHCT Investment in equity instruments TriMedx Advance to supplier Health City Development Ltd Advance given for payment to employees HCCI TOTAL Cura Technologies Inc. Cura Technologies Payment of share application money Payment HCCI TOTAL Have a Heart Foundation Consulting Service Ltd Transactions Figures in brackets are for previous year. 208 Narayana Hrudayalaya Limited Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) - - (-) (-) (-) 0.21 2.90 6.00 6.12 5.82 18.11 Total Total 12.40 65.04 12.11 (0.95) (0.61) (7.91) (6.56) (9.81) 373.02 (20.01) (12.11) (12.11) (530.25) ( ` in million) ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) 6.12 KMP under relative of significant influence of Enterprises ------(-) (-) (-) (-) (-) (-) (-) (-) 0.21 6.00 18.11 12.40 12.11 (0.95) (7.91) (12.11) (12.11) relatives control of control/joint Entity under Entity under KMP and their ------(-) (-) (-) (-) (-) (-) (-) 2.90 5.82 65.04 (0.61) (6.56) (9.81) 373.02 (20.01) (530.25) Associates Associate/ of subsidiary ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) KMP Relative of ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) Key Key Personnel Personnel Management Figures in brackets are for previous year. Purchase of fixed assets Consulting Services Ltd Maintenance of medical equipments TriMedx Purchases of medical consumables and drugs Hrudayalaya Pharmacy Interest income on promissory note Inc. Cura Technologies Investment in promissory note Inc. Cura Technologies Total NHF Discount entitlement (excluding tax) AHF Advance on account of discount entitlement AHF Patents transferred Patents Inc. Cura Technologies Donation given Thrombosis Research Institute Software license fees HCCI Transactions Annual Report 2017-18 209 Company Overview Statutory Reports Financial Statements Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) - 2.54 4.80 4.26 Total Total 27.15 18.12 38.95 10.55 52.52 (4.00) (2.04) (3.00) (9.48) (4.88) 127.48 (37.99) (15.22) (32.63) (43.74) (106.11) ( ` in million) ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) KMP under relative of significant influence of Enterprises ------(-) (-) (-) (-) (-) (-) (-) (-) (-) 4.26 (4.88) relatives control of control/joint Entity under Entity under KMP and their ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) Associates Associate/ of subsidiary ------(-) (-) (-) (-) (-) (-) (-) 7.34 2.54 4.80 KMP (5.04) (2.04) (3.00) Relative of - - - - (-) (-) (-) Key Key 27.15 18.12 38.95 10.55 52.52 (4.00) (9.48) 120.14 (37.99) (15.22) (32.63) (43.74) (101.07) Personnel Personnel Management Share based payments Ashutosh Raghuvanshi Dr. Long term employee benefit* Venugopalan Kesavan Total Kesavan Venugopalan Kesavan Dr. Ashutosh Raghuvanshi Dr. Dr. Anesh Shetty Dr. Dr. Varun Shetty Varun Dr. Viren Shetty Short term employee benefit* Devi Prasad Shetty Dr. Lab outsourcing expenses MSMF Transactions Figures in brackets are for previous year. *The amounts are determined as per section 17(2) of the Income tax Act, 1961 read with related Rules. employee benefits, long-term benefits and share based payments. The remuneration to KMP does not include the Compensation to KMP is bifurcated into short-term provisions made for gratuity and compensated absences, as they are obtained on an actuarial basis the Company a whole. Note: 210 Narayana Hrudayalaya Limited Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) - - - (-) 5.56 0.91 0.91 Total Total 35.74 79.88 15.79 (1.12) (0.92) 207.18 127.30 218.33 (42.71) (72.88) (72.88) (15.72) (18.54) (21.49) (17.75) (15.71) (234.18) ( ` in million) - - - (-) (-) (-) 5.56 0.91 0.91 35.74 79.88 15.79 (2.04) (1.12) (0.92) 207.18 127.30 218.33 (42.71) (72.88) (72.88) (15.72) (21.49) (234.18) relatives control of control/joint Entity under KMP and their ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (18.54) (15.71) (15.71) Associate/ Associates of subsidiary ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) KMP Relative of ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) Key Key Personnel Personnel Management Year 31 March 2017 31 March 2017 31 March 2018 31 March 2018 31 March 2017 31 March 2018 31 March 2017 31 March 2018 31 March 2017 31 March 2017 31 March 2018 31 March 2018 31 March 2017 31 March 2018 31 March 2017 31 March 2017 31 March 2018 31 March 2018 31 March 2017 31 March 2018 31 March 2017 31 March 2018 31 March 2017 31 March 2018 The balances receivable from and payable to related parties (continued) The balances receivable from and payable to related Figures in brackets are for previous year. Other non-current assets - Prepaid rent Charmakki Infrastructures TOTAL Charmakki Infrastructures Financial assets-loans non-current - Security deposit and loans Healthcity Development Limited Other current assets - Prepaid expenses AHF Other non-current assets- Prepaid expenses AHF Other financial assets (Non-current)- Share application money pending allotment HCCI Other current assets- Due for reimbursement of expense AHF TOTAL NHF Hrudayalaya Pharmacy Other financial assets- Due for reimbursement of expense HCCI Balances Related party disclosures(continued) (c) 29. Annual Report 2017-18 211 Company Overview Statutory Reports Financial Statements Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) - - (-) (-) (-) (-) (-) (-) (-) (-) 3.78 1.59 0.62 0.14 0.44 2.55 6.47 0.09 6.85 0.38 6.97 29.09 Total Total 13.50 (0.16) (0.42) (1.71) (0.32) (6.97) 374.56 367.24 (67.59) (67.27) (201.74) (199.45) ( ` in million) - - - (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) 3.78 1.59 0.62 0.14 0.44 2.55 0.09 6.85 0.38 6.97 22.62 13.50 (0.58) (0.16) (0.42) (0.32) (0.32) (6.97) 374.56 367.24 relatives control of control/joint Entity under KMP and their ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) 6.47 6.47 (1.71) (67.27) (67.27) (201.16) (199.45) Associate/ Associates of subsidiary ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) KMP Relative of ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) Key Key Personnel Personnel Management Year 31 March 2017 31 March 2018 31 March 2017 31 March 2018 31 March 2017 31 March 2018 31 March 2017 31 March 2018 31 March 2017 31 March 2018 31 March 2017 31 March 2018 31 March 2017 31 March 2018 31 March 2017 31 March 2017 31 March 2018 31 March 2018 31 March 2017 31 March 2017 31 March 2018 31 March 2018 31 March 2017 31 March 2018 31 March 2017 31 March 2018 31 March 2017 31 March 2018 31 March 2017 31 March 2018 31 March 2017 31 March 2018 31 March 2017 31 March 2018 Figures in brackets are for previous year. TOTAL MSMF High Rock Property Maintenace Wyndham Reef Resort Grand Cayman Office Supply Ltd NHF Charmakki Infrastructures Consulting Services Ltd TriMedx TriMedx TOTAL payables Trade HCCI Have A Heart Foundation Consulting Services Ltd TriMedx -associate TriMedx NHF Trade receivables Trade HCCI Other current assets - Prepaid rent Charmakki Infrastructures Balances 212 Narayana Hrudayalaya Limited Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) - (-) (-) 1.00 Total Total 86.83 10.43 (59.70) (465.65) ( ` in million) - - (-) (-) (-) (-) 1.00 10.43 relatives control of control/joint Entity under KMP and their - - - - (-) (-) (-) (465.65) Associate/ Associates of subsidiary - - - - (-) (-) (-) (-) KMP Relative of - - - (-) (-) (-) Key Key 86.83 (59.70) Personnel Personnel Management Year 31 March 2017 31 March 2018 31 March 2017 31 March 2018 31 March 2017 31 March 2018 31 March 2017 31 March 2018 No amount in respect of related parties have been written off/back or provided for during the year. Related party relationships have been identified by the Management and relied upon auditors. A number of key management personnel, or their related parties, hold positions in other entities that result them having control or significant influence over those entities. A number of these entities transacted with the Group during reporting period. The terms and conditions of the transactions with key management personnel and their related parties were no more favourable than those available, or which might reasonably be expected to in respect of similar transactions with non-key management personnel related entities on an arm’s length basis. Figures in brackets are for previous year. Guarantee outstanding HCCI Share based payments outstanding Ashutosh Raghuvanshi Dr. Other current liabilities - payables AHF Unearned revenue NHF Balances (a) (b) (c ) Note: Annual Report 2017-18 213 Company Overview Statutory Reports Financial Statements Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) 34 Group Information Information about subsidiaries and associates (a) Subsidiaries The consolidated financial statements of the group include the following subsidiaries: Name Principal Activities Country of Ownership interest held by Group incorporation/ 31 March 2018 31 March 2017 Principal place of business Narayana Institute for Advanced Medical and Healthcare India 100.00% 100.00% Research Private Limited (NIARPL) services Narayana Hrudayalaya Surgical Medical and Healthcare India 100.00% 100.00% Hospital Private Limited (NHSHPL) services Narayana Hospitals Private Limited Medical and Healthcare India 100.00% 100.00% (NHPL) services Narayana Health Institutions Private Medical and Healthcare India 100.00% 100.00% Limited (NHIPL) services Narayana Cayman Holdings Ltd Investment Company Cayman Islands 100.00% 100.00% (NCHL) Narayana Hrudayalaya Hospitals Medical and Healthcare Malaysia - 100.00% Malaysia SDN. BHD (NHHM) (refer services note c below) Meridian Medical Research & Hospital Medical and Healthcare India 99.12% 99.09% Limited (MMRHL) services Narayana Vaishno Devi Specialty Medical and Healthcare India 100.00% 100.00% Hospitals Private Limited (NVDSHPL) services Narayana Holdings Private Limited Investment Company Mauritius 100.00% 100.00% (NHPL, Mauritius) Health City Cayman Islands Ltd. Medical and Healthcare Cayman Islands 100.00% NA (HCCI) (refer note d below) services (b) Associates The consolidated financial statements of the group include the following associates: Name Principal Activities Country of % equity interest incorporation/ 31 March 2018 31 March 2017 Principal place of business ISO Healthcare (with effect from 5 July Medical and Healthcare Mauritius 20.02% 20.02% 2016) services Health City Cayman Islands Ltd. Medical and Healthcare Cayman Islands NA 28.60% (HCCI) (refer note d below) services Cura Technologies Inc. (with effect IT Services related to United States of America 43.33% 43.33% from 15 November 2016) Healthcare TriMedx India Private Limited (TriMedx) Healthcare equipment India 10.00% 10.00% management service 214 Narayana Hrudayalaya Limited Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) (c) During the year ended 31 March 2018, Narayana Hrudayalaya Hospitals Malaysia SDN. BHD, a wholly owned subsidiary has been liquidated and the Company received ` 14.87 million against the investment of ` 14.10 million ( net of provision other than temporary diminution of ` 36.38 million). The liquidation process was completed on 24 April 2018. (d) As of 1 January 2018, Ascension Health Ventures LLC (“AHV”) and Naryana Cayman Holdings Limited (“NCHL”) held 71.40% and 28.60% respectively in Health City Cayman Island Limited (“HCCI”). On 2 January 2018, HCCI bought back AHV’s entire stake by transfer of funds. Consequently, the group obtained control over HCCI making it a wholly owned subsidiary on 02 January, 2018 and the formalities relating to the buyback were concluded in all respects on 12 January 2018. 35 Investment in associates The Group has interest in the following companies. This has been accounted for using the equity method in the consolidated financial statements. The Group has significant influence either by virtue of shareholding being more than 20%, provision of essential technical service or Board representation. However the Group does not have control or joint control over any of them. Name Principal Activities Country of % equity interest incorporation/ 31 March 2018 31 March 2017 Principal place of business ISO Healthcare (with effect from 5 July Medical and Healthcare Mauritius 20.02% 20.02% 2016) services Health City Cayman Islands Ltd. (HCCI) Medical and Healthcare Cayman Islands NA 28.60% services Cura Technologies Inc. (with effect from 15 IT Services related to United States of America 43.33% 43.33% November 2016) Healthcare TriMedx India Private Limited (TriMedx) Healthcare equipment India 10.00% 10.00% management service Summarised financial information of material associate HCCI: (` in million) Particulars Health City Cayman Islands Ltd. (HCCI) As at As at 31 March 2018* 31 March 2017 Current assets - 969.52 Non- current assets - 4,120.36 Current liabilities - 548.09 Non- current liabilities - 1,457.64 Net assets - 3,084.15 Ownership held by Group 0.00% 28.60% Group's share of net assets - 882.07 Add: Goodwill on consolidation - 14.80 Add: Impact on account of foreign currency translation reserve - (1.10) - 895.77 * HCCI is a wholly owned subsidiary as at 31 March 2018 Annual Report 2017-18 215 Company Overview Statutory Reports Financial Statements Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) Particulars Health City Cayman Islands Ltd. (HCCI) For the year ended For the year ended 31 March 2018** 31 March 2017 Revenue 2,105.91 2,192.18 Loss before tax (11.08) (154.68) Income tax - - Loss for the year (continuing operations) (11.08) (154.68) Total Comprehensive income (11.08) (154.68) Ownership held by Group 28.60% 28.60% Group's share of total comprehensive income (3.17) (44.24) Less: unrealised gain 1.29 3.94 Group's share of total comprehensive income (net) (4.46) (48.18) ** HCCI was an associate of the group till 1 January 2018 and details have been presented as such. The following table analyzes, in aggregate, the carrying amount and share of profit or loss of individually immaterial associates Particulars 31 March 2018 31 March 2017 Carrying amount of interest in associate 37.49 32.51 Share of loss*** (41.89) (31.16) Share in total comprehensive income (41.89) (31.16) *** Includes loss of ` 58.02 million ( previous year : ` 10.70 million )recorded in excess of investment value considering this as “long term investment” as per Ind AS 28 Investments in Associate and Joint Ventures. 36. Investments, loans and guarantees (a) The Group has paid the following amounts towards share application money for allotment of equity shares: (` in million) Entity As at Payment / (refund) Allotment Foreign currency As at 31 March 2017 during the year during the year translation impact 31 March 2018 Health City Cayman Island Ltd 18.54 (18.54) 18.54 - (18.54) - - (b) The Group has made investment in the following entities: (` in million) Entity As at Allotment / Business Provision / write As at 31 March 2017 Purchases combination off 31 March 2018 during the year adjustment (refer note 45) Investment in equity instruments Trimedx India Private Limited 3.00 8.58 - (11.58) - Health City Cayman Island Ltd 1,439.52 - (1,439.52) - - Cura Technologies Inc. 9.27 - - - 9.27 ISO Healthcare 44.62 - - - 44.62 1,496.41 8.58 (1,439.52) (11.58) 53.89 (c) The Group has given loans to the following entity: 216 Narayana Hrudayalaya Limited Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) (` in million) Entity As at Movement As at Purpose of loans 31 March 2017 31 March 2018 Cura Technologies Inc. 20.01 65.04 85.05 Financial assistance Mytec Process (P) Ltd. - 17.00 17.00 Financial assistance 20.01 82.04 102.05 (d) The Group has provided guarantees to the following entity: (` in million) Entity As at Consolidation As at Purpose of guarantees 31 March 2017 adjustment 31 March 2018 Health City Cayman Island Ltd (HCCI) 465.65 (465.65) - Bank guarantee given to Bank of America through Canara Bank for term loan taken by HCCI. 465.65 (465.65) - 37. Employee benefits A. Defined contribution plan The Company makes contributions towards provident fund and employee state insurance to a defined contribution retirement benefit plan for qualifying employees. Under the plan, the Company is required to contribute a specified percentage of payroll cost to the retirement benefit plan to fund the benefits. The amount recognised as an expense towards contribution to Provident Fund and Employee State Insurance for the year aggregated to ` 268.66 million (previous year: ` 230.06 million ) B. Defined benefit plan The Group operates post-employment defined benefit plan that provide gratuity. The gratuity plan entitles an employee, who has rendered at least five years of continuous service, to receive one-half month’s salary for each year of completed service at the time of retirement/ exit. During the previous year, scheme was partly funded through the gratuity fund administered by a trust formed for this purpose and managed by Kotak Life Insurance and Life Insurance Corporation of India directly. The Group’s obligation in respect of the gratuity plan, which is a defined benefit plan, is provided for based on actuarial valuation carried out by an independent actuary using the projected unit credit method. The Group recognizes actuarial gains and losses immediately in the consolidated statement of profit and loss. Based on the actuarial valuation obtained in this respect, the following table sets out the status of the gratuity plan and the amounts recognised in the Group’s consolidated financial statements as at balance sheet date: Annual Report 2017-18 217 Company Overview Statutory Reports Financial Statements Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) (` in million) Particulars As at As at 31 March 2018 31 March 2017 Defined benefit obligation liability 242.26 188.33 Plan assets 42.22 31.34 Net defined benefit liability 200.04 156.99 Full and final settlement cases* 5.95 6.27 Liability for compensated absences 180.97 109.81 Total employee benefit liability 386.86 273.07 Non-current 144.42 150.84 Current 242.54 122.23 C. Reconciliation of net defined benefit (assets) / liability i) Reconciliation of present values of defined benefit The following table shows a reconciliation from the opening balances to the closing balances for net defined benefit (asset) liability and its components: (` in million) Particulars As at As at 31 March 2018 31 March 2017 Defined benefit obligation as at 1 April 188.33 151.58 Benefits paid (12.81) (13.07) Current service cost 45.18 38.54 Interest cost 13.56 10.93 Past service cost 3.52 - Acquisition / Divestiture 7.93 - Actuarial (gains) / losses recognised in other comprehensive income -changes in demographic assumptions 7.81 4.49 -changes in financial assumptions 3.41 13.58 -experience adjustments (14.67) (17.72) Defined benefit obligations as at 31 March* 242.26 188.33 * The above amount does not include ` 5.95 million (previous year: ` 6.27 million) pertaining to employees who left the organisation but full and final settlement was not done till 31 March 2018. The same was computed on actual basis. ii) Reconciliation of the present values of plan assets (` in million) Particulars As at As at 31 March 2018 31 March 2017 Plan assets at beginning of the year 31.34 16.31 Acquisition 6.72 - Adjustments (1.99) - Contributions paid into the plan 15.94 24.12 Interest income 2.20 1.27 Benefits paid (11.93) (13.02) Return on plan assets recognised in other comprehensive income (0.06) 2.66 Plan assets at the end of the year 42.22 31.34 Net defined benefit liability 200.04 156.99 218 Narayana Hrudayalaya Limited Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) D. i) Expense recognised in consolidated statement of profit and loss (` in million) Particulars For the year ended For the year ended 31 March 2018 31 March 2017 Current service cost 45.18 38.54 Interest cost 13.56 10.93 Past service cost 3.52 - Interest income (2.20) (1.27) 60.06 48.20 ii) Remeasurements recognised in other comprehensive income (` in million) Particulars Year ended Year ended 31 March 2018 31 March 2017 Actuarial (gain) loss on defined benefit obligation (3.45) (0.35) Return on plan assets excluding interest income 0.06 2.66 (3.39) 2.31 E. Plan Assets Plan assets comprises of the following: (` in million) Particulars As at As at 31 March 2018 31 March 2017 Government securities & debt instruments 42.22 31.34 42.22 31.34 The nature of assets allocation of plan assets is in government securities and debt instruments of high credit rating. F. Defined benefit obligation i) Actuarial assumptions The following are the principal actuarial assumptions at the reporting date (expressed as weighted averages): Principal actuarial assumptions As at As at 31 March 2018 31 March 2017 Attrition rate 38.00%-50.00% 35.00%- 53.00% Discount rate 6.70%-7.70% 6.25%-7.50% Expected return on plan assets 6.70%-7.50% 6.25%-7.50% Mortality table IALM 2006-2008 IALM 2006-2008 Ultimate Ultimate Future salary increases First year 9%, 6.00% thereafter 6% Assumptions regarding future mortality are based on published statistics and mortality tables. As of 31 March 2018, the plan assets have been invested in insurer managed funds and the expected contributions to the fund during the year ending 31 March 2019, will be approximately ` 89.57 million (previous year: `212.13 million). Annual Report 2017-18 219 Company Overview Statutory Reports Financial Statements Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) Maturity profile of defined benefit obligation The following payments are expected contribution to the defined benefit plan in future year: (` in million) Particulars Amount 1st following year 89.57 2nd following year 61.91 3rd following year 43.83 4th following year 31.10 5th following year 21.68 Year 6 to 10 36.63 More than 10 years - As at 31 March 2018, the average duration of the defined benefit obligations was 28-42 years (previous year: 25 -27 years) ii) Sensitivity analysis Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown below. Particulars 31 March 2018 31 March 2017 Increase Decrease Increase Decrease Discount rate (0.5% movement) (2.50) 2.56 (13.91) 15.66 Future salary increase (0.5% movement) 2.02 (2.04) 15.03 (13.52) Attrition rate (0.5% movement) (0.42) 0.42 3.22 (3.21) Mortality rate (10% movement) 0.01 (0.01) 1.48 (1.48) Although the analysis does not take account of the full distribution of cash flows expected under the plan, it does provide an approximation of the sensitivity of the assumptions shown. 38 Leasehold land includes 36 acres of land acquired by Narayana Hospitals Private Limited (“NHPL”) in the year 2008 under perpetual lease from Government of Gujarat amounting to ` 1,652.38 million. The aforesaid land has been granted to NHPL by Government of Gujarat at a concessional rate under Gujarat Health Project for construction of heart hospital with certain conditions including but not limited to the following: -1,000 bed hospital for cardiac surgery should be built and be operational within 18 months from the date of completing legal formalities/ handing over with clear title and after obtaining all necessary permissions from all concerned departments. Self dependent 100 seat medical college under Medical Council of India (‘MCI’) Rules should be built and be operational within 36 months. Total project including 5,000 bed super-specialty hospital should be completed within 6 years; -Self dependent medical college, to be established by NHPL, should be set up with total adherence to rules governed by MCI and Government of India; -5% surgery in the proposed health city should be done free. Only medicines and disposable should be charged; -20% cardiac surgeries should be performed at the subsidised rate of ` .07 million only, which includes every expense; -Beneficiaries of the above said 5% and 20% surgeries will be referred by the Government of Gujarat; -15% out-patients should be given free consultation. Diagnostics fees will be charged at 50%; -After achieving, 5,000 surgeries annually, 1,000 surgeries should be performed under concessional rate of ` .07 million and 250 surgeries should be performed free and -Number of student intake and fees for the proposed medical college should be according to the prevailing government rules. NHPL was unable to start the project on the specified date and received a show cause notice from the Government of Gujarat on 22 December 2010. Subsequent to the show cause notice, NHPL replied on 19 January 2011 assuring the Government of 220 Narayana Hrudayalaya Limited Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) Gujarat that the entire project will be completed by June 2016. As per the letter dated 19 January 2011, the timelines committed by NHPL are as follows: Commissioning timelines a) 500 bed multispecialty hospital June-2012 b) 1000 bed multispecialty hospital (expansion) June-2012 c) 100 seat Medical College June-2013 d) 5000 bed Health City June-2016 The Company commenced operations in its Ahmedabad unit on 3 May 2012. As of 31 March 2018, the Group is yet to achieve the above timelines. The Group based on its past projects with government and other authorities believes that the terms/ conditions of grant of leasehold land at concessional rate would be renegotiated and no liability or adjustment to recorded assets is required as at 31 March 2018. 39 NHPL had entered into a lease agreement and obtained a 5 acre land from Siliguri Jalpaiguri Development Authority in February 2009 for construction of a hospital for a consideration of ` 25 Millions disclosed as prepaid rent under other current and non-current assets. As per the lease agreement, NHPL was required to complete the construction of the hospital by August 2009. However, no construction has been completed till date. The Group based on the past projects with Government and other authorities believes that the terms/ conditions of grant of leasehold land at concessional rate would be renegotiated and accordingly no liability or adjustment to recorded assets is required as at 31 March 2018. 40 In the year 2008-09, NHPL was allotted 35 acres of land by Jaipur Development Authority (‘JDA’) for establishing a medical college at Bagrana Grama, Jaipur (“”Bagrana””). Subsequently, NHPL has surrendered 25 acres of land to JDA and retained 10 acres of land. However, in the year 2013-14 JDA intimated NHPL that 6,000 sq. meters of land out of the 10 acres land retained will be utilised for the completion of ring road project. Subsequently, JDA gave another proposal of land allotment at Govind Pura Ropada, in lieu of 10 acres at Bagrana, NHPL gave its consent on the same through letter dated 24 April 2015. Since this land is given in lieu of land allotted at Bagrana, NHPL has requested JDA that the land at Govind Pura Ropada to be valued the same as it was during the time of allotment of land in Bagrana in March 2008. As at 31 March 2018, NHPL has paid ` 54.44 million (previous year : ` 54.44 million) to JDA and accrued the balance payable of ` 29.66 million (previous year : ` 23.73 million). NHPL would capitalize this amount along with any other payment once NHPL gets the land registered in its name. NHPL believes that this advance towards land is recoverable from the JDA and hence provision for doubtful advance is not required as at 31 March 2018. 41 Prepaid expenses Expenses prepaid to related party represents rent paid to Asia Heart Foundation amounting to ` 234.11 million (previous year : ` 249.89 million) . During the year ended 31 March 2016, the Company had entered into an agreement with Asia Heart Foundation to pay ` 108.91 million by converting the future outflow of ` 1 million per month towards discount entitlement of 214 months into present value. ` 108.91 million is being amortized over the period of 214 months beginning from 1 April 2015. Prepaid expense also includes rent paid to Modern Medical Institute amounting to ` 61.54 million (previous year : ` 66.16 million) which is being amortized over a period of 20 years from August 2011. 42 Employee Stock Option Plan (ESOP) During the year ended 31 March 2016, the Company introduced the NH ESOP 2015 (“NH ESOP”) for the benefit of the employees of the Company, its subsidiaries and associates, as approved by the Board of Directors in its meeting held on 12 September 2015. NH ESOP 2015 provides for the creation and issue of 2,040,000 share options that would eventually convert into equity shares of ` 10 each in the hands of the employees of the Group. The options are to be granted to the eligible employees as per the eligibility criteria as determined by the Nomination and Remuneration Committee of the Company at its sole discretion. The share options vest in a graded manner over a period of four years and are exercisable in one or more tranches within a period of four years from the date of first vesting, failing which the options shall lapse. Annual Report 2017-18 221 Company Overview Statutory Reports Financial Statements Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) Pursuant to NH ESOP, the Company granted 814,830 share options till 31 March 2018 (previous year : 814,830 shares) . The Stock compensation cost is computed under the fair value method. For the year ended 31 March 2018, the Company has recorded stock compensation expenses of ` 42.46 million (previous year: ` 59.4 million) and liability as on 31 March 2018 is ` 135.88 million ( previous year: ` 93.42 million). The activity in this stock option plan is summarized below: Particulars As at As at 31 March 2018 31 March 2017 Outstanding as at the beginning of the year (Nos.) 781,283 814,830 Option granted during the year (Nos.) - - Forfeited during the year( Nos.) (990) (1,100) Exercised during the year( Nos.) (54,020) (32,447) Expired during the year(Nos.) - - Outstanding at the end of the year(Nos.) 726,273 781,283 Exercisable at the end of the year(Nos.) - - The weighted average remaining contractual life for the stock options outstanding as at 31 March 2018 is 2.50 years (previous year: 3.50). The exercise price for the stock options outstanding as at 31 March 2018 is ` 10 (previous year : ` 10). Fair value presentation The fair value of share options have been valued based on fair value method as described under Ind AS- 102, Shared-based Payment using Black Scholes valuation options-pricing model, using the fair value of the Company’s shares as on the grant date. Particulars As at As at 31 March 2018 31 March 2017 No. of options granted (Nos.) 814,830 814,830 Date of grant 1 October 2015 1 October 2015 Vesting period (years) 4 4 Expected life of option (years) 5 5 Expected volatility 35% 35% Risk free rate 7.63% 7.63% Expected dividends expressed as a dividend yield - - Weighted-average fair values of options per shares (`) 208.73 208.73 Weighted average share price at the date of exercise (`) 297.15 336.23 43 Earnings per share (EPS) Basic earnings per share The calculation of basic earnings per share for the year ended on 31 March 2018 was based on profit attributable to equity shareholders of ` 513.47 million (previous year: ` 830.53 million) and weighted average number of equity shares outstanding 202,564,923 (previous year: 202,361,490). Diluted earnings per share The calculation of diluted earnings per share for the year ended 31 March 2018 was based on profit attributable to equity shareholders of ` 513.47 million (previous year: ` 830.53 million) and weighted average number of equity shares outstanding after adjustment for effects of all the dilutive potential equity shares 203,004,182 (previous year: 202,835,183). (` in million) Earnings For the year ended For the year ended 31 March 2018 31 March 2017 Profit after tax 513.47 830.53 222 Narayana Hrudayalaya Limited Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) Weighted average number of equity shares (basic) Shares For the year ended For the year ended 31 March 2018 31 March 2017 Total no. of shares outstanding 204,360,804 204,360,804 Effect of Treasury shares (1,795,881) (1,999,314) Weighted average number of equity shares for the year 202,564,923 202,361,490 Weighted average number of equity shares (diluted) Shares For the year ended For the year ended 31 March 2018 31 March 2017 Weighted average number of equity shares for the year (basic) 202,564,923 202,361,490 Weighted average number of equity shares from assumed exercise of stock options 439,259 473,693 Weighted average number of equity shares (diluted) for the year 203,004,182 202,835,183 Basic earnings per share (`) 2.53 4.10 Diluted earnings per share (`) 2.53 4.09 44. Exceptional items Year ended 31 March 2018 A. Exceptional item for the year ended 31 March 2018 includes loss of ` 11.58 million on impairment of investment in associate “Trimedx India Private Limited”. B. Acqusition of Health City Cayman Islands Ltd (HCCI) Ascension Health Ventures LLC (“AHV”) and Naryana Cayman Holdings Limited (“NCHL”) held 71.40% and 28.60% respectively in Health City Cayman Island (“HCCI”). On 2 January 2018, HCCI bought back AHV’s entire stake by transfer of funds. Consequently, the group obtained control over HCCI making it a wholly owned subsidiary on 02 January, 2018 and the formalities relating to the buyback were concluded in all respects on 12 January 2018. The disposal of the associate resulted in a gain of ` 16.99 Millions which has been recognised as an exceptional item in the consolidated financial statements. Year ended 31 March 2017 C. Exceptional item for the year ended 31 March 2017 amounting to ` 13.40 million represents loss on sale of its investment in wholly owned subsidiary “Asia Healthcare Development Limited” through a sale agreement dated 10 November 2016. D. Proceeds from slump sale The Company entered into a business transfer agreement on 1 April 2016 (‘the Agreement’) with Chandramma Educational Society for sale of its business on a slump sale basis, without values being assigned to the individual assets and liabilities. As per the terms of the agreement, the Company had sold the assets and liabilities pertaining to health care business of Hyderabad unit for an aggregate consideration of ` 157.50 million and received ` 155.70 million during the previous financial year as the final sales consideration. 45 Business combinations : (a) NewRise Healthcare Private Limited ( NewRise) On 21 April 2017, pursuant to approval by the Committee formed by the Board of Directors, the Company signed a Share Purchase Agreement (‘SPA’) and acquired 100% equity and preference shares in NewRise Healthcare Private Limited (‘NewRise’), a wholly owned subsidiary of Panacea Biotech Limited for a consideration of ` 756.4 million paid in cash. Further, as per the Order dated 04 October 2017 from the Ministry of Corporate Affairs (“MCA”) the amalagamation of NewRise with the Company was approved under Section 233 of the Companies Act, 2013 and NewRise was amalgamated with the Company with effect from 21 April 2017. Annual Report 2017-18 223 Company Overview Statutory Reports Financial Statements Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) The purchase price has been allocated as follows: ( ` in million) Component Acquisition date fair value Assets Tangible Assets 181.04 Capital work In progress 1,612.83 Other non-current assets 0.14 Current assets 15.89 Total assets 1,809.90 Liabilities Long- term borrowings 780.85 Long- term provisions 0.67 Current liabilities 271.98 Total Liabilities 1,053.50 Fair value of net assets acquired 756.40 (b) Health City Cayman Islands Ltd (HCCI) Ascension Health Ventures LLC (“AHV”) and Naryana Cayman Holdings Limited (“NCHL”) held 71.40% and 28.60% respectively in Health City Cayman Island (“HCCI”). The aforesaid parties had entered into a definitive agreement on 06 November 2017 whereby HCCI would buyback the entire stake of AHV for a consideration of US$ 32.26 million by transfer of funds. Consequently, the group obtained control over HCCI making it a wholly owned subsidiary on 02 January, 2018 and the formalities relating to the buyback were concluded in all respects on 12 January 2018. Divestiture of a non core asset from AHV’s perspective, coincided with Group perspective of leveraging on the vibrant footprints and reputation created by the HCCI and have complete control and ownership of HCCI. (i) The purchase price has been allocated as follows: ( ` in million) Component Acquisition date fair value Assets Tangible assets 3,698.02 Capital work-in-progress 30.37 Intangible assets 221.47 Other non-current assets 133.53 Current assets 1,210.20 Total assets 5,293.59 Liabilities Long- term borrowings 2,094.42 Current liabilities 483.79 Total liabilities 2,578.21 Net assets / Net worth of HCCI 2,715.38 (ii) Fair value of investment in the associate HCCI before buyback Particulars ( ` in million) Fair value of business 4,754.72 Current assets - cash and bank balances 84.06 Less: Loan 1,587.08 Net value of HCCI 3,251.70 Group's share of the above value - 28.6% 929.99 Carrying value of investment as on date of acquisition 913.00 Gain on disposal of associates ( considered as exceptional item) 16.99 224 Narayana Hrudayalaya Limited Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) (iii) Capital reserve recognized in equity Particulars ( ` in million) Fair value of HCCI investment in NCHL 929.99 Fresh investement during buyback 1,643.01 Total investment 2,573.00 Less: Net assets / Net worth of HCCI (refer note (i)) 2,715.38 Capital reserve 142.38 From the date of aqusition, HCCI has contributed revenues amounting to ` 769.70 million and profit amounting to ` 32.12 million to the Company’s results for three months commencing from 2 January 2018 to 31 march 2018. HCCI has generated revenue ` 2,874.07 million (previous year : ` 2,190.28 million) and with profit of ` 27.26 million (previous year : loss of ` 154.68 million) for the year ended 31 March 2018. (c) Healthcare Service Agreement with Dharamshila Cancer Foundation and Research Centre (DCFRC) On March 31, 2017, Company entered into Healthcare Services Agreement (“Agreement”) with Dharamshila Cancer Foundation and Research Centre (“Society”). The Society operates the Dharamshila Hospital and Research Centre (“Hospital”). As per the Agreement with the Society, the Company has the power to direct the operations, exposure or rights to variable returns and the ability to use its power to affect the amount of returns. Accordingly the Company has control over the operations of Hospital resulting in a business combination.The Company commenced the provision of healthcare services at the Hospital on 1st April 2017 (“Commencement Date”). The term of the Agreement will be 25 years, the Parties may extend the term of the Agreement for a further period on such terms as may be mutually agreed. Neither Party shall have the right to terminate the Agreement before 10 years of the Commencement Date. As per the Agreement, the Hospital is renamed as “Dharamshila Narayana Superspeciality Hospital, A Unit of Dharamshila Cancer Foundation And Research Centre”. In terms of the Agreement, the Company shall pay a consideration amounting to ` 180 million per annum with an annual escalation of 5% during the term. The fair value of the consideration, recognized on the acquisition date is determined by discounting the estimated amount payable to the Society applying the Discounted Cash Flow approach. The fair value of estimates are based on discount rate of 15.23%. The excess of purchase consideration over the fair value of net assets acquired has been attributed towards goodwill. The purchase price has been allocated based on Management’s estimates as follows: ( ` in million) Component Acquisition date fair value Property, plant and equipment 357.68 Right to use building 163.94 Intangible assets 463.70 Total 985.32 Goodwill 79.00 Total purchase price 1,064.32 The intangible assets are amortised over a period of ten years as per management’s estimate of its useful life, based on the life over which economic benefits are expected to be realized. The goodwill amounting to ` 79 million comprises value of benefits of expected synergies, future revenue, future market developments, assembled workforce, etc. Annual Report 2017-18 225 Company Overview Statutory Reports Financial Statements Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) None of the goodwill arising on the acquisition is expected to be deductible for tax purposes. The Company has paid an interest-free refundable security deposit amounting to ` 100 million to the Society as per the Agreement. Security deposit was discounted and the differential was treated as prepaid rent and amortised over the term of the Agreement. From the date of Agreement, Dharamshila Narayana Superspeciality Hospital has contributed revenues amounting to ` 769.13 million and loss amounting to ` 233.28 million to the Company’s results for the year ended March 31, 2018. 46. Service Concession Arrangement. (a) National Rural Health Mission, Assam (NRHM) The Company had entered into an agreement with National Rural Health Mission, Assam (NRHM) on 16 August 2012 (“effective date”) to set up a super specialty hospital and to operate and manage such hospital for a period of 30 years. As per the agreement, NRHM will provide ` 220 million in three installments over a period of 1 year during execution of the project besides the existing hospital building on as is where is basis. The Company has received ` 220 million as it met all the conditions related to the grants. As per the terms of the agreement, the Company has entered into lease agreement with NRHM for existing building and land for a lease period of 30 years. Also, as per the agreement not less than 50% of the hospitals beds shall be charged at 1.85% below the National Accreditation Board of Hospitals and Healthcare Providers (NABH) accredited hospital rates applicable. All the surgical, observational and other procedures for which super speciality rates are available in Central Government Health Scheme (“CGHS”) schedule, such rates quoted in CGHS schedule shall apply and for which it is not available, NABH accredited hospital rates shall be applicable. The Company has established a super-speciality hospital providing all the necessary services and for that it has to bear all the expenses in setting up the facilities mentioned in the agreement and thereafter run the hospitals on a day to day basis. The term of the agreement is to commence on the effective date and will continue until the expiration of 30 years on 15 August 2042. Thereafter, this agreement shall be renewed for such additional periods and on such terms and conditions as may be mutually agreed to by the parties to the agreement. The agreement can be terminated by both the parties by mutual written agreement or if the other party breaches or fails to perform any of the covenants of the agreement or if any representation or warranty of the other party under this agreement shall have become untrue. Also, there is no addendum to this agreement. (b) Narayana Vaishno Devi Specialty Hospitals Private Limited (“NVDSHPL”) NVDSHPL entered into a Concession Agreement with Shri Mata Vaishno Devi Shrine Board (“the trust”) to operate, maintain and manage a 230 bed multi specialty hospital on public private partnership model. NVDSHPL is required to pay concession fees to trust as mutually agreed, during the period of agreement. The trust has invested and incurred capital costs to set up/ establish 230 bed multi specialty hospital and has reimbursed costs incurred by the NVDSHPL for providing technical assistance during the refurbishment and commissioning period to the extent of ` 5 million. The period of agreement is 21 Years from the Commercial Operation Date (COD) which is April 2016 . Effective from the COD, Shri Mata Vaishno Devi Shrine Board shall provide Viability Gap Funding (“VGF”) to NVDSHPL for a maximum period of 5 years from the COD on actual basis subject to a cumulative maximum amount of ` 450 million. The Viability Gap Funding received so far is as below: Particulars Financial Year (` in million) Other Operating revenue under Revenue from Operations 16-17 144.17 Other Operating revenue under Revenue from Operations 17-18 110.02 Other Operating revenue under Revenue from Operations 17-18 1.59 Deferred liability for assets funding under non current and current liabilities* 17-18 7.05 * This is paid towards capital expenditure and will be amortised over the life of assets. 226 Narayana Hrudayalaya Limited Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) 47 Additional information pursuant to paragraph 2 of Division II of Schedule III to the Companies Act 2013- ‘General instructions for the preparation of consolidated financial statements’ 31 March 2018 (` in million) Name of the entity Net Assets, i.e., total Share in profit or loss Share in other Share in total assets minus total comprehensive income comprehensive income liabilities As a % of Amount As a % of Amount As a % of Amount As a % of Amount consolidated consolidated consolidated consolidated net assets profit or loss other total comprehensive comprehensive income income 1 2 3 4 5 6 7 8 9 Parent Narayana Hrudayalaya 56.01 5,801.28 104.80 538.79 (13.22) (4.60) 97.33 534.19 Limited Subsidiaries Indian subsidiaries Narayana Hospitals 9.23 956.59 2.33 11.96 - - 2.18 11.96 Private Limited Narayana Institute for (0.00) (0.20) (0.04) (0.22) - - (0.04) (0.22) Advanced Research Private Limited Narayana Health 0.00 0.44 (0.04) (0.23) - - (0.04) (0.23) Institutions Private Limited Narayana Hrudayalaya 2.09 216.87 (32.95) (169.39) (2.62) (0.91) (31.03) (170.30) Surgical Hospital Private Limited Narayana Vaishno Devi (0.01) (0.85) 1.66 8.51 1.18 0.41 1.63 8.92 Specialty Hospitals Private Limited Meridian Medical 3.99 413.64 20.12 103.43 (0.88) (0.31) 18.79 103.12 Research & Hospital Limited Foreign subsidiaries Narayana Cayman 28.29 2,931.08 3.24 16.66 95.08 33.08 9.06 49.74 Holdings Ltd. Narayana Hrudayalaya - - (0.05) (0.24) 20.41 7.10 1.25 6.86 Hospital Malaysia Sdn. Bhd.* Narayana Holdings 0.40 41.54 0.82 4.20 0.06 0.02 0.77 4.22 Private Limited Associates (Investment as per the equity method) - Foreign Health City Cayman ------Islands Ltd ISO Healthcare ------Cura Technologies Inc. ------Non-controlling interests in Indian subsidiary Meridian Medical - - 0.11 0.55 (0.01) (0.00) 0.10 0.55 Research & Hospital Limited 100.00 10,360.38 100.00 514.02 100.00 34.79 100.00 548.81 * The Company was liquidated on 24 April 2018 Annual Report 2017-18 227 Company Overview Statutory Reports Financial Statements Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) 31 March 2017 (` in million) Name of the entity Net Assets, i.e., total Share in profit or loss Share in other Share in total assets minus total comprehensive income comprehensive income liabilities As a % of Amount As a % of Amount As a % of Amount As a % of Amount consolidated consolidated consolidated consolidated net assets profit or loss other total comprehensive comprehensive income income 1 2 3 4 5 6 7 8 9 Parent Narayana Hrudayalaya 74.46 7,173.69 116.57 967.11 1,111.56 3.83 116.97 970.94 Limited Subsidiaries Indian subsidiaries Narayana Hospitals 9.52 916.70 1.65 13.70 - - 1.65 13.70 Private Limited Narayana Institute for (0.00) (0.18) (0.02) (0.13) - - (0.02) (0.13) Advanced Research Private Limited Narayana Health 0.00 0.46 (0.02) (0.13) - - (0.02) (0.13) Institutions Private Limited Narayana Hrudayalaya 2.90 279.65 2.88 23.90 (23.24) (0.08) 2.87 23.82 Surgical Hospital Private Limited Asia Healthcare - - (0.78) (6.45) - - (0.78) (6.45) Development Limited Narayana Vaishno Devi (0.00) (0.33) 0.68 5.63 116.61 0.40 0.73 6.03 Specialty Hospitals Private Limited Meridian Medical 2.71 260.74 (10.17) (84.35) (1,096.19) (3.78) (10.62) (88.13) Research & Hospital Limited Foreign subsidiaries Narayana Cayman 16.15 1,555.84 (0.91) (7.59) - - (0.91) (7.59) Holdings Ltd. Narayana Hrudayalaya 0.15 14.24 (0.11) (0.90) - - (0.11) (0.90) Hospital Malaysia Sdn. Bhd. Narayana Holdings 0.50 48.23 (0.11) (0.94) - - (0.11) (0.94) Private Limited Associates (Investment as per the equity method)- Foreign Health City Cayman (6.10) (587.74) (5.81) (48.18) - - (5.80) (48.18) Islands Ltd ISO Healthcare (0.11) (10.91) (1.31) (10.91) - - (1.31) (10.91) Cura Technologies Inc. (0.20) (19.57) (2.44) (20.25) - - (2.44) (20.25) Non-controlling interests in Indian subsidiary Meridian Medical 0.02 2.36 (0.10) (0.79) (8.74) (0.03) (0.10) (0.82) Research & Hospital Limited 100.00 9,633.18 100.00 829.74 100.00 0.35 100.00 830.09 228 Narayana Hrudayalaya Limited Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) 48. Capital management The Group’s policy is to maintain a stable capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Management monitors capital on the basis of return on capital employed as well as the debt to total equity ratio. For the purpose of debt to total equity ratio, debt considered is long-term and short-term borrowings. Total equity comprise of issued share capital and all other equity reserves. The capital structure as of 31 March 2018 and 2017 was as follows: (` in million) Particulars As at As at 31 March 2018 31 March 2017 Total equity 10,360.38 9,633.18 As a percentage of total capital 56% 82% Long-term borrowings including current maturities 7,639.61 2,076.87 Short-term borrowings 375.81 90.22 Total borrowings 8,015.42 2,167.09 As a percentage of total capital 44% 18% Total capital (Equity and Borrowings) 18,375.80 11,800.27 49 Tax expense (a) Amounts recognised in profit and loss (` in million) Particulars For the year ended For the year ended 31 March 2018 31 March 2017 Current income tax 219.78 509.19 Mat credit entitlement (219.78) - Deferred tax charge/ (credit), net Origination and reversal of temporary differences 289.64 14.47 Tax expense for the year 289.64 523.66 (b) Amounts recognised in other comprehensive income Particulars For the year ended 31 March 2018 For the year ended 31 March 2017 Before tax Tax (expense) Net of tax Before tax Tax (expense) Net of tax benefit benefit Items that will not be reclassified subsequently to profit or loss Re-measurement of defined benefit 3.39 (1.35) 2.04 2.31 (1.96) 0.35 plans Items that will be reclassified subsequently to profit or loss The effective portion of gains /(loss) (16.46) 3.94 (12.52) - - - on hedging instruments in a cash flow hedge (13.07) 2.59 (10.48) 2.31 (1.96) 0.35 Annual Report 2017-18 229 Company Overview Statutory Reports Financial Statements Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) (c) Reconciliation of effective tax rate (` in million) Particulars For the year ended For the year ended 31 March 2018 31 March 2017 Profit before tax 803.66 1,353.40 Tax using the Company’s domestic tax rate (current year 34.61% and previous 278.15 468.41 year 34.61%) Tax effect of: Non-deductible tax expenses 9.21 11.99 Tax-exempt income 18.57 7.39 Share issue expense allowed as deduction (5.85) (5.85) Origination and reversal of temporary differences (80.27) - Current-year losses for which no deferred tax asset is recognised 53.80 13.96 Share of loss of equity accounted investees on which no deferred tax was recognised 16.03 27.46 Others - 0.30 289.64 523.66 50 Recognised deferred tax assets and liabilities (a) Narayana Hrudayalaya Limited :- (i) Deferred tax assets and liabilities are attributable to the following: (` in million) Particulars As at As at 31 March 2018 31 March 2017 Deferred tax asset Provision for doubtful receivables 65.17 40.08 Provision for gratuity 67.81 53.91 Provision for compensated absences 49.35 33.43 Unabsorbed depreciation and business loss 445.01 - Other current liabilities 31.80 36.69 On non current financial liabilities 7.48 9.51 On land indexation of freehold land 18.73 18.73 On security deposit at amortised cost 8.68 7.83 Total deferred tax asset 694.03 200.18 Deferred tax liability Excess of depreciation on fixed asset under Income Tax Act, 1961 over depreciation under (1,309.54) (448.21) Companies Act. Total deferred tax liability (1,309.54) (448.21) Minimim alternative tax assets* 219.78 - Deferred tax liability (net) (395.73) (248.03) *During the year the Company has loss as per normal provision of Income Tax Act, 1961 and so liable to pay tax as per Minimum Alternative tax ( MAT) under section 115 JB of Income Tax Act, 1961. As per Section 115 JAA, MAT assets can be carried forward for 15 years from Assesment year 2018-19, subject to earlier utilization by the Company. 230 Narayana Hrudayalaya Limited Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) (ii) Movement in temporary differences (` in million) Particulars Balances as at Recognised in Recognise in OCI Balances as at 1 April 2017 Profit or loss during during 2017-18 31 March 2018 2017-18 Provision for doubtful receivables 40.08 25.09 - 65.17 Provision for gratuity 53.91 11.47 2.43 67.81 Provision for compensated absences 33.43 15.92 - 49.35 Unabsorbed depreciation and - 445.02 445.02 business loss Other current liabilities 36.69 (4.89) - 31.80 On non current financial liabilities 9.51 (2.03) - 7.48 On Freehold land 18.73 - - 18.73 On security deposit 7.83 0.85 - 8.68 Excess of depreciation on fixed asset (448.21) (861.33) - (1,309.54) under Income Tax Act, 1961 over depreciation under Companies Act. Minimim alternative tax assets - 219.78 - 219.78 (248.03) (150.12) 2.43 (395.72) (b) Meridian Medical Research & Hospital Limited :- (i) Deferred tax assets and liabilities are attributable to the following: (` in million) Particulars As at As at 31 March 2018 31 March 2017 Deferred tax asset Provision for doubtful receivables 2.61 2.01 Provision for gratuity 6.09 4.65 Provision for compensated absences 3.37 2.93 On brought forward loss 163.01 252.58 Others 2.53 3.10 Total deferred tax asset 177.61 265.27 Deferred tax liability Excess of depreciation on fixed asset under Income Tax Act, 1961 over depreciation under (97.18) (90.83) Companies Act. Total deferred tax liability (97.18) (90.83) Minimim alternative tax assets Deferred tax asset (net) 80.43 174.44 Annual Report 2017-18 231 Company Overview Statutory Reports Financial Statements Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) (ii) Movement in temporary differences (` in million) Particulars Balances as at Recognised in Recognise in OCI Balances as at 1 April 2017 P & L movements during 2017-18 31 March 2018 Provision for doubtful receivables 2.01 0.60 - 2.61 Provision for gratuity 4.65 1.28 0.16 6.09 Provision for compensated absences 2.93 0.44 - 3.37 On brought forward loss 252.58 (89.57) 163.01 Others 3.10 (0.57) - 2.53 Excess of depreciation on fixed asset (90.83) (6.35) - (97.18) under Income Tax Act, 1961 over depreciation under Companies Act. 174.44 (94.17) 0.16 80.43 Note: During the year, in one of the subsidiary company deferred tax asset has been recognised for the first time. The asset was not recognised in earlier years as the company was not expected to make profit. 51 Financial instruments: Fair value and risk managements A. Accounting classification and fair values (` in million) Fair value As at 31 March 2018 FVOCI Amortised cost Total Level 1 Level 2 Level 3 Total Financial assets Investments - 50.29 50.29 - - - - Trade receivables - 2,789.76 2,789.76 - - - - Cash and cash equivalents - 333.29 333.29 - - - - Bank balances other than above - 19.25 19.25 - - - - Loans - 507.15 507.15 - - - - Other financial assets - 140.20 140.20 - - - - - 3,839.94 3,839.94 - - - - Financial liabilities Borrowings - 7,339.13 7,339.13 - - - - Trade payables - 2,961.92 2,961.92 - - - - Other financial liabilities 2,117.21 2,117.21 Interest rate swap 16.50 - 16.50 - 16.50 - - 16.50 12,418.26 12,434.76 - 16.50 - - As at 31 March 2017 FVOCI Amortised cost Total Level 1 Level 2 Level 3 Total Financial assets Investments - 29.54 29.54 - - - - Trade receivables - 1,569.10 1,569.10 - - - - Cash and cash equivalents - 262.43 262.43 - - - - Bank balances other than above - 78.78 78.78 - - - - Loans - 232.63 232.63 Other financial assets - 372.71 372.71 - - - - - 2,545.19 2,545.19 - - - - Financial liabilities Borrowings - 1,888.23 1,888.23 - - - - Trade payables - 2,065.81 2,065.81 - - - - Other financial liabilities - 751.98 751.98 - - - - 4,706.02 4,706.02 - - - - 232 Narayana Hrudayalaya Limited Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) Measurement of fair values The carrying value of all financial assets approximates the fair value. B. Financial risk management The Group’s activities expose it to a variety of financial risks: credit risk, market risk and liquidity risk. (i) Risk management framework The Group’s risk management is carried out by a central treasury department under policies approved by the Board of Directors. The Board supervises overall risk management, as well as policies covering specific areas, such as foreign exchange risk, credit risk and use of financial instruments. (ii) Credit risk Credit risk is the risk that the counterparty will not meet its obligation under a financial instrument or customer contract, leading to financial loss. The credit risk arises principally from its operating activities (primarily trade receivables) and from its investing activities, including deposits with banks and financial institutions and other financial instruments. Credit risk is controlled by analysing credit limits and creditworthiness of customers on a continuous basis to whom credit has been granted after obtaining necessary approvals for credit. The collection from the trade receivables are monitored on a continuous basis by the receivables team. The Group establishes an allowance for impairment that represents its estimate of expected losses in respect of trade and other receivables based on the past and the recent collection trend. The maximum exposure to credit risk as at reporting date is primarily from trade receivables amounting to ` 2,789.76 million (previous year: ` 1,569.10 million). The movement in allowance for impairment in respect of trade and other receivables during the year was as follows: (` in million) Allowance for credit loss As at As at 31 March 2018 31 March 2017 Opening balance 127.66 186.71 Add : On aqusition of subsidiary 89.42 - Foreign currency translation 1.89 - Credit loss recognised / (reversed) 83.06 (59.05) Closing balance 302.03 127.66 No single customer accounted for more than 10% of the revenue as of 31 March 2018, 31 March 2017 . There is no significant concentration of credit risk. Credit risk on cash and cash equivalent is limited as the Group generally transacts with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. (iii) Liquidity risk Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. In addition, the Group maintains line of credit as stated in Note 16. Annual Report 2017-18 233 Company Overview Statutory Reports Financial Statements Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) The table below provides details regarding the undiscounted contractual maturities of significant financial liabilities as of 31 March 2018: (` in million) Particulars Less than 1 year 1 - 2 years 2-5 years more than 5 years Total Borrowings 375.81 674.12 2,503.65 3,785.55 7,339.13 Trade payables 2,961.92 - - - 2,961.92 Other financial 1,088.91 61.21 291.94 691.65 2,133.71 liabilities Total 4,426.64 735.33 2,795.59 4,477.20 12,434.76 The table below provides details regarding the undiscounted contractual maturities of significant financial liabilities as of 31 March 2017: (` in million) Particulars Less than 1 year 1 - 2 years 2-5 years more than 5 years Total Borrowings 90.22 611.22 501.20 685.59 1,888.23 Trade payables 2,065.81 - - - 2,065.81 Other financial 692.79 - - 59.19 751.98 liabilities Total 2,848.82 611.22 501.20 744.78 4,706.02 Market risk Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices, such as foreign exchange rates and interest rates. Foreign currency risk The Group operates internationally and a major portion of the business is transacted in several currencies and consequently, the Group is exposed to foreign exchange risk through operating and borrowing activities in foreign currency. The currency profile of financial assets and financial liabilities as at 31 March 2018 and 31 March 2017 are as follows: Particulars As at 31 March 2018 As at 31 March 2017 USD in million USD in million Financial assets Trade receivables 8.78 1.04 Cash and cash equivalents 2.19 0.70 Other financial assets (current) 5.50 0.68 Financial liabilities Borrowings 56.10 7.76 Trade payables 3.07 0.31 Other financial liabilities 1.35 0.01 Net assets / (liabilities) (44.05) (5.65) Sensitivity analysis The sensitivity of profit or loss to changes in exchange rates arises mainly from foreign currency denominated financial instruments and the impact on other components of equity arises from foreign exchange forward/option contracts designated as cash flow hedges. (`in million) Particulars Impact on profit or loss Impact on other components of equity As at As at As at As at 31 March 2018 31 March 2017 31 March 2018 31 March 2017 USD Sensitivity INR/USD - Increase by 1% (28.65) (3.67) (32.04) (3.67) INR/USD - Decrease by 1% 28.65 3.67 32.04 3.67 234 Narayana Hrudayalaya Limited Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) Cash flow and fair value interest rate risk The Group’s main interest rate risk arises from long-term borrowings with variable rates, which expose the Group to cash flow interest rate risk. (a) Interest rate risk exposure Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. In order to optimize the Company’s position with regard to interest income and interest expenses and to manage the interest rate risk, treasury performs a comprehensive corporate interest rate risk management by balancing the proportion of fixed rate and floating rate financial instruments in its total portfolio. Type of Derivative No. of Contracts As at 31 March 2018 As at 31 March 2017 Amount Hedged Fair Value Amount Hedged Fair Value ( in USD million) ( INR million) ( in USD million) ( INR million) Interest rate swap 6 57.00 (16.50) - - The Company has entered into derivative financial instruments with a counter-party (bank) with investment grade credit ratings. Derivatives valued using valuation techniques with market observable inputs are mainly interest rate swaps. The most frequently applied valuation techniques include swap models using present value calculations. The models incorporate various inputs including the credit quality of counterparties, interest rate curves and forward rate curves of the underlying. As at March 31, 2018, the changes in counterparty credit risk had no material effect on the hedge effectiveness assessment for derivatives designated in hedge relationships and other financial instruments recognized at fair value. The exposure of the Group’s borrowing to interest rate changes at the end of the reporting period with respect to long term borrowings with variable interest rates from banks are as follows: (` in million) Particulars As at As at 31 March 2018 31 March 2017 Variable rate long term borrowings including current maturities 5,659.88 2,076.87 Total borrowings 5,659.88 2,076.87 (b) Sensitivity The Company’s main interest rate risk arises from long-term borrowings with variable rates, which expose the Company to cash flow interest rate risk. (` in million) Impact on profit or loss Impact on other components of equity Particulars As at As at As at As at 31 March 2018 31 March 2017 31 March 2018 31 March 2017 Sensitivity 1% increase in interest rate (56.60) (20.77) (56.60) (20.77) 1% decrease in interest rate 56.60 20.77 56.60 20.77 The interest rate sensitivity is based on the closing balance of secured term loans from banks. Annual Report 2017-18 235 Company Overview Statutory Reports Financial Statements Notes to the consolidated financial statements for the year ended 31 March 2018 (Continued) 52 Reclassification and comparative figures Certain reclassifications have been made to the prior year’s financial statements to enhance comparability with the current year’s financial statements. The Group had classified accrued salaries and benefits under Other financial liabilities - current in the financial statement for the previous year. However , in the current year the same has been reclassified to Trade payable appearing in note 20. The impact on reclassification is given below: (` in million) Particulars Previously reported Amount After 31 March 2017 reclassified reclassification 31 March 2017 Other financial liabilities - current 873.14 (180.35) 692.79 Trade payables 1,885.46 180.35 2,065.81 The Management believes that the impact of the above reclassifications is not material. for and on behalf of the Board of Directors of Narayana Hrudayalaya Limited Dr. Ashutosh Raghuvanshi Viren Shetty Managing Director Whole -time Director DIN: 02775637 DIN: 02144586 Kesavan Venugopalan Sridhar S Chief Financial Officer Company Secretary Place: Bengaluru Date: 29 May 2018 236 Narayana Hrudayalaya Limited Narayana Hrudayalaya Limited # 258/A, Bommasandra Industrial Area Bengaluru - 562158 www.narayanahealth.org